Advantages and Disadvantages of Mutual Funds

What are the advantages and disadvantages of investing in mutual funds for investors?

Mutual funds offer several advantages over direct investing in individual stocks or securities, such as the follows:
1) Using mutual funds can help you diversify your portfolio with minimum investment.
2) Mutual funds are managed and supervised by professionally qualified fund managers who are in a better position to understand the markets than individual investor.
3) Ease of Investing. You can conduct transactions by mail, phone, or over the Internet.
4) Ability to participate in investments typically only available for larger investors.
5) Liquidity advantage. Mutual fund shares are liquid and can be bought or sold on any business day.
6) Government oversight. Mutual funds are subject to government regulations.
7) Convenience and flexibility.
8) Low cost investment.

The disadvantages of mutual funds include:
1) Loss of control: Fund managers make all the decisions about which securities to purchase and sell and when to do so.
2) Dilution: Although diversification reduces the risk involved, it can also be a disadvantage due to dilution.
3) Mutual funds tend to have high sales charges.
4) They are not insured against any losses.
5) Poor trade execution.

* Featured Article: How To Invest In Mutual Funds
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