A Look at Some of the Mutual Funds Advantages and Disadvantages
Mutual funds are popular with many investors mainly for the mere fact that, they have a set of advantages that they can identify with, which are considerably better than those that one can enjoy in other types of investment securities.
One of the most appraised advantages is the fact that they are professionally managed by a fund manager on behalf of investors.
An investor may not be able to do all that follow up on his own and as such, his investment would probably not survive the storms of the stock market.
Another advantage that comes with mutual funds is convenience.
Convenience in this aspect refers to the ease with which one can trade in them.
Buying, selling and changing distribution details or strategy are relatively easy tasks to carry out when one is dealing with the funds.
Changing of the distribution details, also known as asset allocation is a process that is open to execution every once in a while, due to the fact that description of different categories of the funds keep changing as the market conditions change.
This goes hand in hand with the advantage that they are highly liquid.
They trade on a daily basis and in large quantities.
Obtaining information about mutual funds is also much easier than obtaining information on other types of investment securities.
The information is availed through a prospectus that are readily available from different investment firms and online as well.
When you look at the prospectus that is offered by any mutual fund investing firm, you will get to see the outlined tasks and duties that are assigned to the manager, which would otherwise be left to the investor.
Among the disadvantages that mutual funds are open to include, high risks and costs.
They are normally more easily affected by changing market conditions, more than other types of investment securities.
The fluctuations in market conditions cause the charges and fees payable to fluctuate as well.
However, when there are no storms in the market conditions, the tendency is for the funds with high risk factor to attract high returns.
While mutual funds are popular and highly recommendable as far as returns are concerned, they have a disadvantage of being costly.
They come with loads of fees and charges that are payable on a regular basis, some monthly and others annually.
Other charges are imposed during a transaction.
For example, loaded funds must incur a cost whether one is buying or selling shares.
There is also normally a diversification penalty, chargeable whenever an investor wants to diversify his investment in order to spread and reduce the risk that is characteristic of many categories of these funds.
One of the most appraised advantages is the fact that they are professionally managed by a fund manager on behalf of investors.
An investor may not be able to do all that follow up on his own and as such, his investment would probably not survive the storms of the stock market.
Another advantage that comes with mutual funds is convenience.
Convenience in this aspect refers to the ease with which one can trade in them.
Buying, selling and changing distribution details or strategy are relatively easy tasks to carry out when one is dealing with the funds.
Changing of the distribution details, also known as asset allocation is a process that is open to execution every once in a while, due to the fact that description of different categories of the funds keep changing as the market conditions change.
This goes hand in hand with the advantage that they are highly liquid.
They trade on a daily basis and in large quantities.
Obtaining information about mutual funds is also much easier than obtaining information on other types of investment securities.
The information is availed through a prospectus that are readily available from different investment firms and online as well.
When you look at the prospectus that is offered by any mutual fund investing firm, you will get to see the outlined tasks and duties that are assigned to the manager, which would otherwise be left to the investor.
Among the disadvantages that mutual funds are open to include, high risks and costs.
They are normally more easily affected by changing market conditions, more than other types of investment securities.
The fluctuations in market conditions cause the charges and fees payable to fluctuate as well.
However, when there are no storms in the market conditions, the tendency is for the funds with high risk factor to attract high returns.
While mutual funds are popular and highly recommendable as far as returns are concerned, they have a disadvantage of being costly.
They come with loads of fees and charges that are payable on a regular basis, some monthly and others annually.
Other charges are imposed during a transaction.
For example, loaded funds must incur a cost whether one is buying or selling shares.
There is also normally a diversification penalty, chargeable whenever an investor wants to diversify his investment in order to spread and reduce the risk that is characteristic of many categories of these funds.