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Mutual Fund Advantages

Mutual funds have become a popular investment vehicle, and for good reason. They offer some distinct advantages over other kinds of investments.

Professional Investment Management: It can be hard to outperform a professional investment manager backed by a research team and resources that may not be available to you as an individual investor. Investing in individual securities takes a significant amount of time — not only research time, but ongoing review and management.

Diversification: A typical mutual fund invests in dozens or even hundreds of securities. Spreading your investment across several securities helps reduce risk. For most individual investors, it would be difficult to diversify across as many different securities as a mutual fund.

Low Cost: Individual transaction costs for buying and selling securities are typically much higher for an individual investor than for a mutual fund manager. Why? Mutual funds are investing thousands and millions of dollars at a time, buying more securities than an individual investor ever would, and as a result paying lower transaction costs.

Liquidity: Most mutual funds offer daily access to your money.

Average Mutual Fund Expense Ratios*
The cost of managing a mutual fund is referred to as the expense ratio. It may include management, administrative and operating expenses, and 12b-1 fees (marketing and distribution expenses).

 
Money Market Funds**
Bond Funds
Balanced Funds
Large & Mid-Cap Stock Funds
Small Cap Stock Funds
International Stock Funds

 
0.66%
1.08%
1.29%
1.35%
1.48%
1.75%

 
Front load: A fee paid at the time the investment is initially made.

Back load: A fee for withdrawing your investment early.

* Morningstar – 12/31/04
** Strategic Insight

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