What Are the Advantages & Disadvantages to Mutual Funds?

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The advantages of mutual funds are the professional portfolio management and the lack of individual fees associated with separate equities. Disadvantages of mutual funds include not being able to control the portfolio and more expensive costs. Weigh the pros and cons of investing in mutual funds with help from an investment manager in this free video on mutual funds.

Part of the Video Series: Stocks & Mutual Fund Investments
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Video Transcript

OK so the advantages and disadvantages of mutual funds. When you're investing in mutual funds, you have the advantage of professional portfolio management, you don't need to be watching the equities and how they trade everyday. And looking for highs and lows and doing charting, you in essence hire a professional portfolio manager or a management team to oversee that portfolio when you purchase a mutual fund. The disadvantage is that you don't have control over that portfolio. If you have specific equities that you want to invest in, and very targeted areas that you would like to put your money in the market, you don't have that control with a mutual fund because the portfolio manager's determining where that money is being put. Another disadvantage may be some expenses, some mutual funds are more expensive than others so that's something to always research in a prospectus. And on the, if you're investing in a mutual fund, your expenses if it's a no load fund or very low expense fund, may actually turn out that you've got a very large portfolio under management and very well diversified in the market and you're not having to pay for all the equity trading fees. So there are disadvantages and advantages, it really comes down to do you want to have actively manage money that you're working on everyday in the market or do you want a mutual fund that someone else is going to manage and you can just check in on it from time to time.


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