In this country, the New York Stock Exchange started up around 1830 with a handful of listed companies. Mutual funds naturally followed some years later. Advantages of Mutual Funds Mutual funds can offer instant diversification, and diversification reduces risk.
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. Many investors strive to keep commissions as low as possible, but they can still swallow 3-5 percent of an investor's portfolio. Funds typically have expenses of about 1-2 percent.