Funds can reduce risk by spreading it among a large number of investments. By holding lots of securities, if one stock performs badly, its impact on the overall portfolio can be mitigated. Many mutual funds can be purchased commission free, which reduces the impact of commissions and expenses on an investor's portfolio. Also, by pooling money accepted from many investors, mutual funds can reduce the percentage that expenses eat up in a portfolio. Of course, if a fund is bought through a broker who charges a commission, or if the fund charges a load, then these savings may be lost.
Funds provide ways of targeting sectors and specific goals.
Fund companies hire experts who understand the complicated capital markets outside the United States, and can follow and react to news in those markets faster than most individuals. Mutual funds are a very liquid investment for individuals. If cash is needed in a hurry, an investor can always sell fund shares and get that day's closing redemption price. There is no need to worry about finding a buyer or at what price the shares might sell. One of the reasons for these dismal returns is that funds have a variety of fees and expenses.