Advantages and Disadvantages of Mutual FundsWritten by John Mussi
Outlined below are some of advantages and disadvantages of mutual funds. Every investment has advantages and disadvantages. But it's important to remember that features that matter to one investor may not be important to you. Whether any particular feature is an advantage for you will depend on your unique circumstances. For some investors, mutual funds provide an attractive investment choice because they generally offer following features: Professional Management: Professional money managers research, select, and monitor performance of securities fund purchases. Diversification: Diversification is an investing strategy that can be neatly summed up as "Don't put all your eggs in one basket." Spreading your investments across a wide range of companies and industry sectors can help lower your risk if a company or sector fails. Some investors find it easier to achieve diversification through ownership of mutual funds rather than through ownership of individual stocks or bonds. Affordability: Some mutual funds accommodate investors who don't have a lot of money to invest by setting relatively low pound amounts for initial purchases, subsequent monthly purchases, or both. Liquidity: Mutual fund investors can readily redeem their shares plus any fees and charges assessed on redemption at any time. But mutual funds also have features that some investors might view as disadvantages, such as:
| | Different Types of Mutual FundsWritten by John Mussi
This is a guide to different types of mutual funds. When it comes to investing in mutual funds, investors have literally thousands of choices. Before you invest in any given fund, decide whether investment strategy and risks of fund are a good fit for you. The first step to successful investing is figuring out your financial goals and risk tolerance - either on your own or with help of a financial professional. Once you know what you're saving for, when you'll need money, and how much risk you can tolerate, you can more easily narrow your choices. Most mutual funds fall into one of three main categories - money market funds, bond funds (also called "fixed income" funds), and stock funds (also called "equity" funds). Each type has different features and different risks and rewards. Generally, higher potential return, higher risk of loss. Money Market Funds: Money market funds have relatively low risks, compared to other mutual funds. Investor losses have been rare, but they are possible. Money market funds pay dividends that generally reflect short-term interest rates, and historically returns for money market funds have been lower than for either bond or stock funds.
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