What is a Mutual Fund?
You purchase “shares” in a mutual fund, just as you would an individual stock. Only a mutual fund is inherently diversified, holding shares in a greater number of securities than any single investor is likely to buy on his or her own. Just as the mutual fund’s shareholders share the costs of buying securities, they also share in the proceeds from the fund’s growth.
Mutual Fund Advantages:
- Professional money management that handles day-to-day decisions.
- Diversification of underlying securities.
- Convenience of not having to research securities or place trades yourself.
- Liquidity to cash out your investment at any time without having to find a buyer.