What are the benefits of a public mutual fund?


Quick Answer

The benefits of a public mutual fund include the variety of choices available within funds, convenience, liquid availability and professional money management, according to Investor Words. Most public mutual funds also allow shareholders to sell shares at any time.

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Full Answer

A noteworthy benefit of public mutual funds is the investor's ability to diversify a portfolio, according to Investor Words. Many public mutual funds are available with varying investment minimums, which offer investors choices in terms of risk. For example, an investor may invest a small portion in a high-risk public mutual fund and secure additional funds in a low-risk public mutual fund.

Public mutual funds also offer investors the advantage of advanced portfolio management, according to Investopedia. For example, a management fee is included in the expense ratio, and investors pay this small fee for help in managing financial transactions. Dividends can also be reinvested when purchasing public mutual funds. Once interest income or dividends are declared for a public mutual fund, investors can purchase additional shares with these funds.

Risk reduction is another benefit of purchasing public mutual funds. Many investors can reduce portfolio risk by spreading out investments across 200 or more different securities, according to Investopedia, which reduces the risk if one security plummets. Public mutual funds are also declared as a fair-priced option with less risk of price fluctuation to reduce the risk of significant losses.

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