Lux Investing

What are the merits and demerits of investing in Mutual Fund?

Public Comments

1. merits: diversification, research based investment management, staff dedicated to fund performance demerits: fees
2. Advantages: MFs are run by professionals. They do extensive research on each company they buy, and have more intelligent info than any individual can glean. They also own thousands of stocks and bonds in their portfolios, limiting disaster should a stock become worthless. Disadvantages: You pay for the expertise, through loads. The MF's are paid for their services out of the fund. (Whether the fund does well or not). Secondly, MF's can be handicapped by the need to diversify so greatly, and tend to have many stocks in their portfolios that you wouldnt necessarily buy.
3. The upside is that your money is spread over many diverse stocks. This prevents a huge loss should one stock tank. The downside is that it is a long term investment. But all in all the safest way to go for retirement
4. + diversification with low investment, many to choose from, good research available - capital gains distribution can add considerably to taxes, expenses are an issue
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