Mutual Funds : A Great Investment For Someone Who Is New Essay

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Mutual funds are a great investment for someone who is new to investing and for those who desire not to assume a great risk. There are advantages and drawbacks associated with any type of investment and mutual funds are no exception. The advantages of mutual funds are diversification, professional management and minimum initial investment while the drawbacks are risk, costs and taxes. Diversification of investing in mutual funds simply exemplifies the saying, “don’t put all of you eggs in one basket.” Mark Schuab states that diversification reduces investment risk and due to this investors look for ways to most efficiently spread risk among many different investments (Schaub, 2013). Mutual funds will comprise of a portfolio or a basket of securities which can be numerous. If one or several of these securities declines significantly there would be minimal risk due to the numerous securities within the basket. The next advantage is professional management. This is advantage to the investor because they will not decide what will be invested; this is the responsibility of manager of the mutual funds. The manager will have thorough knowledge and time to research which securities to add or remove from mutual funds. The last advantage is minimal initial investment. This advantage allows an investor to start investing at a low amount. Mutual funds can be initiated between as low as $250 to $1,000 with the initial price beginning at $2,500; after this funds can be

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