Question

2. What are some comparative advantages of investing in the following?

a. Unit investment trusts.

b. Open-end mutual funds.

c. Individual stocks and bonds that you choose for yourself.

Answer 1

a. Unit investment trusts tend to offer low cost a relatively stable portfolio. The investor in such trusts is aware of his stock ownership. They tend to cater more to sophisticated investors. Low management fees and portfolio turnover are another attractive feature.

b. Open ended mutual funds are actively managed and offer high level of services to the investors. They are devoid of administrative burdens and are suited more for investors who do not have in depth knowledge. The mutual fund offers a wide variety of investing choices.

c. In this case, the investor controls the portfolio he holds and has more flexibility in investing. Also, the investors are only charged on the stocks they trade in. There is professional management and many investing choices.