Personal Finance (8th Edition) (What's New in Finance)
Personal Finance (8th Edition) (What's New in Finance)
8th Edition
ISBN: 9780134730363
Author: Arthur J. Keown
Publisher: PEARSON
Question
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Chapter 14, Problem 1PA
Summary Introduction

To discuss:

The advantages of possible of owning a mutual fund.

Introduction:

Mutual fund refers to the fund that is managed by the professionals and consists of the pool of money from various different investors in order to purchase different and various securities.

Expert Solution & Answer
Check Mark

Explanation of Solution

  • The foremost advantage of mutual funds is that they diversify the money of the investors to buy different securities and doesn’t invest in a single stock.
  • The second most advantage is it helps the investors to save the transaction cost due to large volume.
  • The mutual fund provides the return that is adjusted with risk.
  • The mutual fund provides various types of financial services to the investors as book keeping, checking the account for investors.
  • Investing in mutual funds is quite flexible as the investor can invest in any mutual fund that suits them and will help them achieve their financial goals.
  • Mutual funds offer liquidity as well.

Principal 8

  • Principal 8 states that that the risk and returns go hand in hand.
  • Diversification helps to reduce risk by investing in mutual funds that is a great advantage related to principal 8.
  • The advantage related to principal 8 is that they provide investors with professional management that helps to reduce risks by investing in the right stocks.
Conclusion

Investment in mutual funds provides many advantages to the investors.

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