Disadvantages of Investing in a Mutual Fund

1. No Insurance – Mutual funds are not insured against losses. Meaning, despite its risk-reducing diversification benefits, losses can still occur, and it is possible (although extremely unlikely) that you could even lose your entire investment.
   
   
2. Fees and Expenses – Someone should manage the fund and this fund manager, like every professional, has corresponding payment. There are also  commission and redemption fees and some operating fees that pay for the fund's management expenses.
   
   
3. Investors does not have the control – The fund managers does all the decision making about which securities to buy/sell and when to do so. One thing you ought to remember when you invest in mutual fund is that you trust your money with someone else.
   
   
4. Trading Limitations – Although mutual funds are highly liquid in general, most mutual funds cannot be bought or sold in the middle of the trading day. Buying and selling usually happens at the end of the day, once the current value of the holdings has been calculated.
   
   
5. Dilution – Diversification reduces the risk involved in investing in mutual funds, however, it also pose the disadvantages of diluting the returns. For example, if a single security held by a mutual fund doubles in value, the mutual fund itself would not double in value because that security is only a portion of the fund's holdings. By holding a large number of different investments, mutual funds tend to do neither exceptionally well nor exceptionally poorly.