Equity funds are mutual funds that are entirely invested in stocks. Mutual fund managers may choose to invest in large cap, mid cap, or small cap firms. The cap size refers to the size of the firm. Large cap firms are the older firms that have a lot of capital and have been around for a while. Small cap firms are much smaller and often very new firms that have a lot of chance for growth. Mid cap firms are somewhere in between.

Mutual fund managers may choose to invest on only value stock. They do this by looking for stocks that are priced lower than they believe they are worth. For example, if Stock A is priced at $34 but they believe it would be priced at $40, they will purchase it because they believe it will go up to $40 in the near and they would get a profit of $6.

Hedge funds are becoming very popular in the news with the guru’s clamoring for increased regulation and the chicken littles sounding the market crash alarm. Hedge funds are private investment organizations that uses a different strategies protecting wealth from risks of volatile markets. It uses an unconventional investments to makeup losses when the market turns sour. They generally have a very different investment policies as compared to any mutual fund. Hedge funds tend to be more philosophical as compared to mutual funds which may cite growth or income. Capital growth and capital preservation are indeed goals of hedge fund investors.

Every investment type has its share of pros and cons, the same holds true when it comes to mutual funds. For many investors this is the only way to go while others are very wary or even contemptuous of those who elect to navigate the safer waters of mutual funds rather than taking the risks of the open seas of the stock market. Either way you should understand that there are many benefits to be found by working with mutual funds rather than stocks.

You will find a good many of these benefits listed here.

• Safety in Numbers
• Diversity
• Professional management
• Lower Transaction Fees
• The Ability To Cash Out At Any Time
• Easy As Pie
• Safety in numbers.

Just as there are many benefits to investing your hard earned dollars in mutual funds there are a few drawbacks to this decision as well. In order to make a truly informed investment decision you need to be aware of both the pros and cons of mutual fund investing before you make the decision as to whether or not this style of investing is suitable to meet your financial needs now and in the future.

Keep reading for a little bit of enlightening information on the downside of investing in mutual funds.

• Low return on investment
• Dubious management
• Too much of a good thing isn't really good.
• Personal control. Are you a control freak?
• The big killer for many investors is that the fund manager takes actions that are right for the fund and those actions may not be what is best for your individual situation.
• Low return on investment.