We have seen concept, history and types of Mutual Fund in earlier blogs in this series. In this blog, I have tried to cover advantages of Mutual Funds as under:
Mutual Fund managers are professionally trained and experienced, constantly watching and managing their fund.
Since one of the primary rules of investment is to diversify portfolios, a mutual fund can be a simple and successful way to accomplish this goal. With one investment, one can own shares of stock in many corporations. A mutual fund portfolio combines a variety of stocks, bonds, commodities and cash, mutual funds are, by nature, diversified.
Another advantage of mutual funds is the ability to get in and out with relative ease. In general, one can sell its mutual funds in a short period of time without there being much difference between the sale price and the most current market value. Normally, the funds take a day to come back into your account.
Match your style
You can find a mutual fund that matches almost exactly what you are looking for from an investment. This could be related to both your risk tolerance and your investment horizon.
Economies of Scale
The easiest way to understand economies of scale is by thinking about volume discounts. Mutual funds are able to take advantage of their buying and selling size and thereby reduce transaction costs for investors. With mutual funds, you can make transactions on a much larger scale for less money.
Many investors don’t have the exact sums of money to buy round lots of securities. Smaller denominations of mutual funds provide mutual fund investors the ability to make periodic investments through monthly purchase plans. So, rather than having to wait until you have enough money to buy higher-cost investments, you can get in right away with mutual funds.
I will cover disadvantages of Mutual Fund in next blog in this series.
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