is MUTUAL FUND less risky and less expensive?

what're the advantages and disadvantages of mutual funds?

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  • Anonymous
    1 decade ago
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    An investment in a "good" mutual fund has less risk than an investment in one particular security, because it provides more diversification for the money and with diversification comes less risk. Investments in mutual funds in general are more expensive than investments in a particular security, because they are subject to annual expenses averaging about 1.5%, whereas an investment in a security is subject to only the one time brokerage expense of purchasing it. Depending upon the broker, that can be not an insignificant cost. There may also be a fee associated with purchasing a mutual fund also, if the fund is subject to a front end load.

    Advantages of mutual funds:

    1. diversification of investments with small investment

    2. less risk than with purchase of an individual security

    3. some mutual funds offer investment opportunities that would be difficult to achieve on ones own, such as investing in Chinese securities for example

    4. There is a great variety to choose from--thousands with hundreds of different investment objectives

    5. Professional management so you do not have to keep a continual eye on your investments. Someone else is doing it for you.

    Disadvantages:

    1. Annual expenses averaging 1.5%. There are index funds available with much lower expense ratios as low as 0.2%

    2. Annual distribuition of realized capital gains upon which you will have to pay taxes. This may very well be the greatest disadvantage.

    3. Unless the fund is exchange traded, you can not purchase or sell until the market close.

    4. The fund may change fund managers after you purchase the fund and the investment style may change drastically from what you had expected.

    5. Funds are normally purchased based on past performance. That is not a good indicator of future performance, and you may be in for a rude surprise.

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  • 1 decade ago

    today mutual fund is the most risky of all ventures. Reason is that a depositor has no opportunity to look into what investment the investors are managing the money. It will depend only on the success in the stock market wherein your money is placed . So, of all security be aware of.

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  • 1 decade ago

    depends on what u mean...

    For me funds are better than stocks (most not all).

    I have several very high quality stocks (Like GE, etc), and several funds..

    For me my mix is very little risk...

    As long as u are diversified I see nothing wrong with doing a little of everything.

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  • 1 decade ago

    you can't go wrong with mutual funds...start investing right away and do this your whole life........vanguard has lots of good ones and extremely low fees.........if you need assistance in picking your investments go to american funds and they will find a broker in your area that will work with you.......both of these companies are the best of the best... you can start with as little as $50.00 a month..........key to making money in the stock market is to invest each month over your whole life, you can make yourself very wealthy by doing this, they have examples they can show you.

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  • Anonymous
    1 decade ago

    Hi, i suggest a great site with plenty of Issues related to your Investing and everything around it. it also provide clear and accurate answer to many common questions.

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  • 1 decade ago

    ...than what ?

    Mutual fund diversifies risk, however you have to pay for this.

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