| Outlined below are some of the advantages and | | | | assessed on redemption at any time. |
| disadvantages of mutual funds. Every | | | | |
| investment has advantages and disadvantages. | | | | But mutual funds also have features that some |
| But it\'s important to remember that features | | | | investors might view as disadvantages, such |
| that matter to one investor may not be | | | | as: |
| important to you. Whether any particular | | | | |
| feature is an advantage for you will depend | | | | Costs despite Negative Returns: |
| on your unique circumstances. | | | | |
| | | | Investors must pay sales charges, annual |
| For some investors, mutual funds provide an | | | | fees, and other expenses regardless of how |
| attractive investment choice because they | | | | the fund performs. And, depending on the |
| generally offer the following features: | | | | timing of their investment, investors may |
| | | | also have to pay taxes on any capital gains |
| Professional Management: | | | | distribution they receive - even if the fund |
| | | | went on to perform poorly after they bought |
| Professional money managers research, select, | | | | shares. |
| and monitor the performance of the securities | | | | |
| the fund purchases. | | | | Lack of Control: |
| | | | |
| Diversification: | | | | Investors typically cannot ascertain the |
| | | | exact make-up of a fund\'s portfolio at any |
| Diversification is an investing strategy that | | | | given time, nor can they directly influence |
| can be neatly summed up as \"Don\'t put all | | | | which securities the fund manager buys and |
| your eggs in one basket.\" Spreading your | | | | sells or the timing of those trades. |
| investments across a wide range of companies | | | | |
| and industry sectors can help lower your risk | | | | Price Uncertainty: |
| if a company or sector fails. Some investors | | | | |
| find it easier to achieve diversification | | | | With an individual stock, you can obtain |
| through ownership of mutual funds rather than | | | | real-time (or close to real-time) pricing |
| through ownership of individual stocks or | | | | information with relative ease by checking |
| bonds. | | | | financial websites or by calling your broker. |
| | | | You can also monitor how a stock\'s price |
| Affordability: | | | | changes from hour to hour - or even second to |
| | | | second. By contrast, with a mutual fund, the |
| Some mutual funds accommodate investors who | | | | price at which you purchase or redeem shares |
| don\'t have a lot of money to invest by | | | | will typically depend on the fund\'s net |
| setting relatively low pound amounts for | | | | asset value, which the fund might not |
| initial purchases, subsequent monthly | | | | calculate until many hours after you\'ve |
| purchases, or both. | | | | placed your order. |
| | | | |
| Liquidity: | | | | Making any sort of investment involved a |
| | | | certain amount of risk so it is always wise |
| Mutual fund investors can readily redeem | | | | to seek the advice of a professional before |
| their shares plus any fees and charges | | | | making any decisions. |