A mutual fund is a professionally-managed trust that pools the savings of many investors and invests them in securities like stocks, bonds, short-term money market instruments and commodities such as precious metals. The funds are generally well diversified to offset potential losses.
Benefits of Investing In Mutual Funds
- Diversification:A mutual fund will provide you with a "basket of stocks" that will provide diversification in your portfolio.
- Effective for smaller accounts: Since a mutual fund provides exposure to hundreds or thousands of stocks, you do not need to go out and buy hundreds or thousands of stocks on your own, which could be very prohibitive for you if you have a smaller-sized investment account and limited capital to invest with.
- Professional management: Mutual funds are run by investment managers who would likely be considered "experts" in their field. Mutual fund companies have resources that are above and beyond what one may have as an individual, retail investor.