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Mutual funds offer a number of benefits for most investors, including:
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Instant Diversification: |
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Most mutual funds
invest in many different individual securities -- typically 50 or more.
To do the same, an individual investor would need to have many thousands,
or even millions, of dollars to invest and a great deal of time.
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Cost Savings: |
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By pooling their money
into a mutual fund, investors can take advantage of economies of scale.
If you traded securities by yourself, you'd probably have to pay relatively
high brokerage commissions and potentially other fees. In addition, you
may not get the best price when buying or selling a stock or bond. Because
mutual funds buy stocks or bonds "in bulk," they may be able
to negotiate an advantageous price and pay lower brokerage commissions.
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Professional
Management: |
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Mutual funds are
run by highly trained portfolio managers who decide where to invest shareholders'
money. These professionals can devote themselves full-time to monitoring
market and economic trends. They have the skills and resources to carefully
analyze economic and financial data and to identify the investments with
the best potential. They chart trends, scrutinize individual companies,
and ensure that the fund's portfolio is fully diversified – which
reduces your exposure to the ups and downs of individual securities.
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Choice: |
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Mutual funds offer
a variety of investment options to meet your needs. Whether you're seeking
short-term income, hoping to gain tax advantages or looking to achieve
long-term growth, mutual funds provide you with choices that can match
your investment needs today and for the future.
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Flexibility: |
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You can usually buy,
exchange, or sell fund shares anytime, which makes it easy for you to
adjust your investment portfolio as your needs change.
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Convenience: |
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Mutual funds offer
a convenient way to begin investing in the market. Many fund companies
make it easy for you to move money from your bank account into a mutual
fund or funds. In many cases, you can also set up a program to automatically
transfer a set amount of money from your bank account into a fund on a
regular basis.
Although investing
can be profitable over the long term, you should know that it can involve
a considerable amount of risk. Unlike bank deposits, mutual funds are
not insured or guaranteed by the U.S. government or any other financial
institution. In other words, you could lose some or all of the money that
you invest.
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