Mutual Funds
The top mutual fund is a professionally managed Investment fund that pools money from many investors to purchase Securities.
Advantages
- Increased diversification: A fund diversifies holding many securities; this diversification decreases risk.
- Daily liquidity: Shareholders of open-end funds and unit investment trusts may sell their holdings back to the fund at regular intervals at a price equal to the NET ASSET VALUE of the fund's holdings. Most funds allow investors to redeem in this way at the close of every trading day.
- Professional investment management: Open-and closed-end funds hire portfolio managers to supervise the fund's investments.
- Ability to participate in investments that may be available only to larger investors. For example, individual investors often find it difficult to invest directly in foreign markets.
- Government oversight: Mutual funds are regulated by a governmental body
- Transparency and ease of comparison: All mutual funds are required to report the same information to investors, which makes them easier to compare.
Disadvantages
Mutual funds have disadvantages as well, which include:
- Fees
- Less control over the timing of recognition of gains
- Less predictable income
- No opportunity to customize.
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