Mutual Funds Advantages And Disadvantages

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ADVANTAGES OF MUTUAL FUND

An investors can invest directly in individual securities or indirectly through a financial intermediary. Globally, mutual have established them self as the means of investment for the retail investor advantages are as followes

Transparency
Mutual funds transparently declare their portfolio every month. Thus an investor knows where his or her money is being deployed an in case they are not happen wit the portfolio they can withdraw at short notice

Diversification
An investor under takes risk if he invest all his funds in a single scrip. Mutual fund invest in number of companies across various industries and sectors. This diversification reduces the riskiness of the investment.

Research
Mutual funds can appord …show more content…
Dividends received mutual funds debt schemes are tax exempt to over limit of rs 9000 allows under section 80L of the income tax Act

Flexibility
Mutual funds offers a family of schemes an investors have the option of transferring there holding from one scheme to other.

Liquidity
Often investors cannot sell the securities held easily, which in case of mutual funds, they can easily Ancash their investment by selling their units to the fund if otisan open-ended scheme or selling them on a stock exchange if it is close ended scheme

Affordability
Compare to direct investing in the capital market, investing to funds is relatively less expensive as a benefit of economies of scale is passed on the to the investors.

Safety from loss due to unethical practice The probability of loss stemming from fraud, scandal or bankruptcy invoiving the funds management company is very small. By transferring investment risk to shareholder, mutual fund companies side-step the problems that have been especially painful for people dealing with certain thrifts, banks, and insurance companies among others.

DISADVANTAGES OF MUTUAL …show more content…
Investors have no right to interfere in there decision-making process of a fund manager which some investor find as constraint in achieving financial objectives.

Difficulty in selecting suitable fund scheme Many Investor find it difficult to select one option from the huge amount of funds/scheme/plans available. For this, they may have to take advise from financial planners in order to invest in the right fund to achieve their objectives.

Professional management
Some funds does not perform in neither there market. As there management is not dynamicenough to explore the available opportunity in the market, thus many investors debt over whether or not the so callprofessionals are any better than mutual fund or investor himself, for picking stocks.

Dilution
Because funds have small holdings accurse different companies high return from few investments often don’t make much difference on the over all return. Dilution is also the result of a success full fund getting the big when money force into funds that have had strong success , maagers often has trouble finding a good investment for all the new money.
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