Pros include, but are not limited to: 1) Easy way to diversify a portfolio. It's hard to properly diversify investing only in individual stocks unless you have very large amounts of money. Mutual funds each hold a basket of stocks that are designed to achieve certain goals (e.g. track the S&P 500, track a bond index, target the technology sector, etc.). So, you can hold one share of a mutual fund and you could have exposure to up to thousands of stocks. 2) Lots of information available about various mutual funds. Places like Morningstar have great information you can use to find out about different mutual funds, a screener to narrow down options based on criteria you select, etc. 3) Lots of no-load options. No-load mutual funds will allow you to buy or sell shares without a commission. There will be ongoing fees while you hold the fund, but not to buy or sell. 4) You can build a well-diversified portfolio with a handful (5-6) of quality mutual funds. Cons include, but are not limited, to: 1) There are a lot of mutual funds available, so it can sometimes be difficult to narrow things down. 2) Load mutual funds will typically have a commission that you pay when you buy or sell, called a "load." Some of these loads (especially front-end loads that you pay when you buy in) range as high as 5.75%. This means that if you invest $10,000 into a fund with a 5.75% front-end load, only $9,425 of that will be invested and the rest will go to the fund company or advisor who recommends it. 3) Like any investment, mutual funds that have performed well in the past may not continue to perform as well in the future. 4) The expense ratios on mutual funds are usually higher than the expense ratios on exchange-traded funds that are similar (i.e. a mutual fund that tracks the S&P 500 will tend to have higher expense ratios than an ETF that tracks the S&P 500). Hope this helps some.
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