Write about a topic or current event that applies to the content in the current unit/module(Mutual Funds: Advantages and Disadvantages). This may be a current event that exemplifies or applies to the chapter concept(s), or a narrative written piece that relates to the unit concepts. You must have at least one reputable outside source for your written piece (in addition to the textbook). Examples of acceptable sources are Barrons, The Wall Street Journal, Kiplinger, Investopedia, cnnmoney.com, cnbc.com. The source should be current (from the last six months). The article/source is the catalyst for your critical written piece. This is not an assignment where you simply report on an article or current event. You should engage in critical thinking, as the article/source is used to substantiate your point(s).

 

Mutual Funds

In America, mutual funds fall under the most popular investment choice for most investors. Mutual funds are a collection of funds from numerous investors invested in securities such as bonds, stocks, money market instruments or any other assets. They offer a collection of pros to investors that include liquidity, diversification, minimal investment requirements, professional management, and various offerings. Equally, mutual funds pose certain risks. For instance, PricewaterhouseCoopers (n.d.) notes that the Covid 19 pandemic has caused social and economic disruptions that have caused new challenges that face mutual funds. Mutual funds are experiencing slower growth and shrinking fees which accelerated as the situation worsened. The organic growth of the mutual fund industry progressed slowly, leading to long term effects that are being experienced even as the pandemic diminishes. From downward pressure on fees, reduced profit margins, and changing investor preferences, it is almost impossible to ignore the challenges the pandemic is causing for mutual funds investors.

One of the cons of mutual funds is fluctuating return. Hayes and Boyle (2020) suggest that, like other investment that lack a guaranteed return, there is always a risk of depreciation in an investor’s mutual fund. Equity mutual funds are likely to experience price fluctuations due to several factors. The pandemic has disrupted the financial industry as more people are reluctant to spend their income. Also, instead of investing, most people are retrieving their liquidated assets leading to a financial crisis in the security markets. Additionally, the pandemic has affected the price of most trading assets like crude oil, gold, cryptocurrencies, and many more. Thus, all these factors combined attribute to the fluctuating returns that investors are currently facing from their mutual funds’ investments. Since such investments carry risks, which external factors may influence, it is impossible to avoid the losses of mutual funds investments.