What is Mutual Fund ?
A mutual fund is a professionally-managed investment scheme, usually run by an asset
management company that brings together a group of people and invests their money in stocks,
bonds and other securities
Why choose mutual fund ?
A mutual fund will provide diversification through the exposure to a multitude of
stocks. The reason that is recommended over owning a single stock is that owning an individual
stock would carry more risk than a mutual fund. This type of risk is known as unsystematic risk.
What are the advantages of investing in mutual funds?
Mutual funds are able to take advantage of their buying and selling size and thereby reduce
transaction costs for investors. When you buy a mutual fund, you are able to diversify
without the numerous commission charges. Imagine if you had to buy the 10-20 stocks
needed for diversification.