Final answer:
Mutual funds offer benefits such as diversification, professional management, and liquidity to their shareholders. A significant portion of U.S. households invest in mutual funds, acknowledging their importance in financial planning, particularly for retirement savings.
Step-by-step explanation:
Mutual funds provide a range of benefits for their shareholders, making them an attractive option for financial investment. Primarily, they offer diversification, allowing investors to spread their investment across various stocks and bonds, reducing individual risk. The professional management of these funds means that investors don't need extensive knowledge or time to manage their portfolios. Additionally, mutual funds provide liquidity, as shares can be sold easily on the market, generally speaking. This is particularly useful for those who might need to convert their investments into cash at relatively short notice.
According to the Investment Company Factbook, a significant percentage of U.S. households are invested in mutual funds. This speaks to their popularity and the role they play in many people's retirement savings or pension plans. The mutual fund's assets are managed in such a way as to balance potential return with the inherent risks involved, usually offering lower risks and returns compared to investing in individual stocks directly.