Purpose

• The purpose of a mutual fund is to offer investors the chance to invest in a professionally managed fund and take advantage of growth opportunities. Mutual fund companies raise money for the fund by selling shares of stock and investing the profits in a list of assets monitored by a group of investment managers. Investors make money based on the overall performance of the fund and share prices rise and fall based on each individual investment asset allocated in the fund.
  
  

Types

• Several types of mutual funds offered by fund companies are popular among investors and offer investors a number of trading options based on their risk tolerance level. Aggressive growth funds are a popular fund type among young investors who are looking for a safe method for growing their assets. Bond funds are another form of mutual funds that give investors the option of investing in a safe, steady source of income. Growth and income funds offer transition investors the opportunity to invest in a fund that offers them growth opportunities while giving them a nice percentage of income.
  
  

Importance

• Mutual fund companies offer the average investor an opportunity to invest in a fund managed by a group of individuals that have a great deal of investing experience and in most cases make educated decisions. Mutual funds are important to investment portfolios because they offer a large amount of diversification in one investment.
  
  

Advantages

• Mutual fund companies offer investors a chance to invest in a fund that has a great deal of diversification along with professional management. Mutual funds invest in assets of companies that have been researched for stability and typically offer higher gains and stability than companies individual investors monitor themselves.
  
  

Disadvantages

• Mutual funds have a few disadvantages that investors must consider before investing with a fund company. Investors will not be able to stipulate exactly where there money will be invested and will be at the mercy of the fund managers. Mutual fund companies often charge management fees and require that a minimum investment amount is met before they allow shares to be purchased.