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a mutual fund is a way for many investors to pool their money and have it professionally managed toward a common investment goal. A fund may invest in stocks, bonds, cash equivalents or a combination, depending on its stated objectives.
The Benefit of Mutual Funds Diversification
By investing in a mutual fund, you get a measure of diversification. But despite the built-in diversification offered by mutual funds, it's important to choose funds that provide the right risk/reward balance for your needs.
Diversification reduces risk but does not eliminate it. Professional research and management
If you're like most people who don't have the time or energy to thoroughly research individual stock or bonds, a mutual fund may make a lot of sense. Cost efficiency
By pooling money together in a mutual fund, investors may purchase stocks or bonds with much lower trading costs than if they did so on their own. Liquidity
With most funds, you can easily sell your fund shares for cash. Mutual fund shares are purchased and redeemed at the next net asset value calculated after an order is received; while stocks and bonds can be bought or sold any time the markets are open at whatever price is available.
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Financial Planning