No one investor has a preferred status over any other investor because mutual funds issue only one class of common stock. Each investor shares mutually with other investors in gains and distributions derived from the investment company portfolio. Each investor's share in the fund's performance is based on the number of shares owned. Mutual fund shares may be purchased in either full or fractional units, unlike corporate stock, which may be purchased in full units only. Because mutual fund shares can be fractional, the investor can think in terms of dollars rather than number of shares owned.
Mutual funds provide diversification by investing in many different companies.
Many funds offer automatic reinvestment of capital gains and dividend distributions without a sales charge. An investor can liquidate a portion of his holdings without disturbing the investment's balance or diversification. Tax liabilities for an investor are simplified because each year the fund distributes a 1099 form explaining taxability of distributions. A fund may offer various withdrawal plans that allow different payment methods at redemption. Purchases of non-deposit products involve investment risks including the possible loss of principal amount invested.