4 Advantages that Mutual Funds Offer

Learning about mutual funds advantages can help you to understand the benefits that these investments can provide. Here are a few of the advantages that you can reap by investing in mutual funds.

1. Diversification

One of the biggest advantages that mutual funds offer is the ability to diversify your portfolio. A mutual fund is made up of many different smaller investments. When you buy a share of a mutual fund, you are buying a piece of a completely diversified portfolio. Diversification allows you to protect your investment and your entire portfolio. Since a mutual fund owns the stocks of potentially hundreds or thousands of different companies, the bankruptcy of one company will not affect the portfolio that drastically. This presents you with a safety net of sorts as an investor.

Before mutual funds were invented, an investor would require a significant amount of money to be properly diversified in their portfolio. You have to physically buy several shares of hundreds of different stocks across different sectors and industries. This was simply not possible for the average investor that only had a few hundred dollars invest. With a mutual fund, anyone can get a share of a diversified portfolio from the beginning.

2. Steady Returns

Another advantage of the mutual fund is that it provides you with steady returns and growth in your portfolio. Mutual funds represent one of the safest forms of investment on the market today. While most funds do not post astounding gains like you could reap from a single stock, they do typically bring in some sort of return each year. Therefore, instead of experiencing the dramatic highs and lows of the stock market, you can experience a slow and steady growth curve in your investment funds.

3. Convenience

Investing in mutual funds is a very convenient proposal. You can do so through any broker or any financial institution in the country. When you put in an order for a share of a mutual fund, the net asset value of the fund is calculated at 4:00 p.m. of that same day. Whatever the calculated value is at that time is what you will pay for the mutual fund shares. Therefore, the purchasing process of mutual funds is a lot simpler than buying stocks, bonds, or any other type of security. There is not a bid/ask price to worry about or any real-time pricing to be concerned with. Everyone gets the same price at the end of the day. If you want to sell your shares it will also take place at the end of the day when the market closes.

4. Many Options

Every investor should be able to find some type of mutual fund that suits them. There are thousands of different mutual funds to choose from and each of them has their own investment strategy and their own collection of investments that make up the fund. Therefore, regardless of your area of interest, you should be able to find something to invest in.

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