A mutual fund pools money from many investors for the purpose of investing in stocks, bonds, money market instruments and other assets.
Mutual funds provide an attractive investment choice because they generally offer the following benefits:
- Professional Investment Management — Professional money managers research, select, and monitor the performance of the assets held in a mutual fund
- Diversification — Diversification is an investing strategy that can be 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 dollar amounts for purchases.
- Liquidity — Mutual fund investors can readily redeem their shares at anytime. Redemptions may incur fees and charges.