What are the main benefits of investing in mutual funds?

The average investor who buys stocks and bonds needs more time to assess securities and the expertise to make qualified investment decisions. Mutual funds allow the investor to hire a fund manager to make these decisions effectively. Managers possess training in market analysis and have an understanding of economics. They work to assess the value of a company’s stock and develop an investment strategy that establishes buy and sell criteria based on an educated, tactical discipline.

Some of the main benefits include:

Instant Diversification. Many have heard the phrase, “Don’t put all of your eggs in one basket.” In a mutual fund, investor monies are spread across various securities investments. By investing in mutual funds instead of individual securities, the account growth or loss is based upon a group of different assets rather than the performance of a single security.

Professional management. By investing in mutual funds, the investor is not involved in evaluating and maintaining the underlying portfolio investments. Instead, the day-to-day decisions of each fund are handled by experienced, professional money managers.

Lower fees and expenses. Mutual funds provide economies of scale. Because mutual funds pool the resources of many investors, the costs per share passed on to each investor from purchasing the underlying securities in a mutual fund are often less than if they would buy the same individual securities on their own.

Convenience. Dividends and capital gains can be used to purchase additional shares, facilitating investor portfolio growth.

Automatic Investment Planning. Commonly, investors can set up a dollar-cost-averaging plan with their bank or brokerage account to invest a set amount each month into the mutual fund of their choice.

There are thousands of mutual funds to choose from. Every type of investment fund—including equity, bond, diversified, balanced, and international funds—gives you access to investments in the world’s most substantial companies.

You can also invest in foreign securities. Although Canada has a strong economy and is a G5 nation, it represents approximately 3% of the capitalization trading in non-domestic markets. The U.S. offers access to the highest capitalization in the world, while tremendous investment opportunity lies outside of North America—accessible via mutual funds.

Financial Consultation. Your financial advisor can help you design and review your mutual fund portfolio regularly. Most advisors offer the majority of the better-performing funds—with foreign and Canadian securities included, including a wide range of international and global funds.