Advantages of Investing in a Mutual Fund

1. Mutual Funds Offer Diversification – When you buy a mutual fund it's like getting access to hundreds of individual stocks or bonds. This way of investing minimizes your exposure to potential volatility unlike buying individual securities.
   
   
2. Mutual Funds Are Liquid – Liquidity is a measure of how quickly you can convert your assets into cash at your discretion. Depending on the policies of your Mutual fund Company, if you want to sell, the proceeds from the sale is usually available the day after you sell the mutual fund.
   
   
3. Mutual Funds Come in Many Varieties – A mutual fund comes in many types and styles. There are stock funds, bond funds, money market mutual funds and balanced funds. The availability of different types of mutual funds allows you to build a diversified portfolio at low cost and without much difficulty.
   
   
4. Mutual Funds are Professionally Managed – Many investors may not have the resources or the time to manage individual stocks. Unlike investing in individual securities, which requires resources and considerable amount of time, mutual fund has managers and professional analysts dedicated to researching and analyzing current and potential holdings for their mutual fund.
   
   
5. Mutual Funds Offer Automatic Reinvestment – Depending on the Mutual fund policy, an investor can easily and automatically have capital gains and dividends reinvested into their mutual fund without extra fees.

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.