Mutual Funds

Mutual Funds Vs. Other Investments

From an investors' viewpoint mutual funds have several advantages such as:

• Professional management and research to select quality securities
• Spreading risk over a larger quantity of stock whereas the investor has limited to buy only a hand full of stocks. The investor is not putting all his eggs in one basket
• Ability to add funds at set amounts and smaller quantities such as $100 per month
• Ability to take advantage of the stock market which has generally out performed other investment in the long run
• Fund manager are able to buy securities in large quantities thus reducing brokerage fees

• The investor must rely on the integrity of the professional fund manager
• Fund management fees may be unreasonable for the services rendered
• The fund manager may not pass transaction savings to the investor
• The fund manager is not liable for poor judgment when the investor's fund loses value
• There may be too many transactions in the fund resulting in higher fee/cost to the investor - This is sometimes call "Churn and Earn"
• Prospectus and Annual report are hard to understand
• Investor may feel a lost of control of his investment dollars
• There may be restrictions on when and how an investor sells/redeems his mutual fund shares