Advantages of mutual funds

Mutual funds can be an attractive choice for both new and experienced investors for a number of reasons:

Affordability. You can open a mutual fund account for as little as $1,000, and add to it in even smaller amounts. In some cases, you can invest as little as $50 a month if you arrange for an automatic transfer from your checking or savings account into your fund account.

Diversification. By buying shares in a mutual fund, you're investing in all the different stocks or bonds the fund owns. Owning many investments instead of just a few can help protect you against losses you might have if the ones you'd selected happened to fall in value.

Liquidity. You can convert your shares into cash at any time by selling them back to the fund. The selling price is determined by the fund's net asset value (NAV) and may be higher or lower than the amount you originally paid.

Professional expertise. A professional manager runs each fund, making all buy and sell decisions.

Some words of caution

As with all investments, there are risks you encounter when you purchase mutual funds. For example, results are not guaranteed. That means you can lose money as well as make money, even though your funds are managed by experts.