The Advantages And Disadvantages Of Mutual Funds

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1. Mutual Funds(Open ended) A Mutual Fund is an investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as bonds, stocks, money market instruments and identical assets. Advantages: 1. Liquidity An advantage of mutual funds is the ability to get in and out with relative ease. In general, you are able to sell your mutual funds in a short period of time without there being much difference between sale price and the most current market value. 2. Diversification By purchasing mutual funds, you are provided with the immediate benefit of instant diversification and asset allocation without the large amounts of cash needed to create individual portfolios 3. Professional selection of individual…show more content…
Certainty about the specific investments in trust The money placed in an investment trust is used to capitalize a fixed portfolio. Unlike mutual funds or hedge funds, for some investors, this is a key advantage because they are given the ability to always know what they own. Disadvantages: 1. Opportunity cost This means that by putting money in unit trust, you lost the opportunity to use it elsewhere. Of course there is no guarantee that putting the money elsewhere will yield better returns. In the same way, putting money in unit trust prevents you from investing it elsewhere, such as, directly in the stock market. 2. Fees and charges The services provided by the unit trust fund managers are not free. There are fees and charges payable by the unit holders to the unit trust schemes. Granted these fees are almost negligible compared to the professional expertise received by the investors, it is something the unite holders have to bear. 5. Other type of funds 1. Money market funds It is open-ended funds which normally invest in short-term securities, usually one year, for example treasury bills or Government bonds. Money market funds are greatly recognize as being really safe and give a great
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