Pros and Cons of Mutual Funds

Mutual Fund are relatively new Asset Class. Basically they are not a separate asset class but they derive their value from underlying asset class such as stock, gold and bonds.

Mutual Fund is nothing but the Fund management company pulls the money of large number of small investors in a common pool and with this money it invests in the Assets and after a certain period of time, they share the profit or loss.

Here are some Pros & Cons of Mutual Funds -

- The main advantage of mutual fund is its convenience. If you are a professional or working person and have little time to manage your hard earned money than mutual fund is the best option for you. You can simply divert your money to the fund manager and enjoy the profit.

- If you buy and sell any stock in a year than it will attract a short term capital gain tax but if a fund manager buy or sell any stock within 1 year of period than it won’t attract any capital gain tax. It will only gain Capital gain tax if you redeem your investments 1 year before.

- It is really easy and very convenient to build your own MF Portfolio according to your needs.

- The main disadvantage of Mutual Fund is that, there are so many mutual funds in the market that finding a good mutual fund is itself a job.

- Another pitfall of mutual fund is that, several mutual funds fail to beat the benchmark index. There are several mutual funds in USA which can not beat the Dow Jones, a Crude 30 stocks Index.

- If you are willing to invest your time and money both than mutual funds are not for you. Because mutual funds are not for those people who want to make fortunes out of their money via Investments such as Warren Buffet.

So there are Pros & Cons of Mutual Fund. Everybody has its own situation so you should check the above pros and cons before buying any Mutual Fund…!!!