What is mutual fund?
When you invest in a mutual fund, you give money to a financial professional or a group of them, to invest the money for you. The person or team who manages the money for you is called mutual fund manager.
Compare investing in a mutual fund with picking stocks yourself – pros and cons
Why you may want to invest in a mutual fund – Pros
- If you invest in a mutual fund, you don’t need to learn how to research on companies and review their performances from time to time. The mutual fund manager will do it for you.
- A Mutual fund often has a diversified portfolio, including dozens of or hundred of stocks. Some people think the risk of such a diversified portfolio is lower than that of a small number of stocks chosen by individual investors.
- Some people believe a professional mutual fund manager with lots of resources can deliver a return better than that of stocks they pick themselves.
Why you may not want to invest in a mutual fund – Cons
- Mutual funds charge various fees, while you only need to pay commissions when you buy stocks. So some people think the cost to pick stock themselves is lower than that of investing in a mutual fund.
- Some investors believe their individual stock picks can deliver a return better than many mutual funds.
- Some investors just feel the process to choose stock is fun.
How to invest in a mutual fund
You can invest in mutual funds by contacting a broker in your city or opening an account online.