Final answer:
The cost of investing in a mutual fund is measured by management fees, operational costs, and other charges, aside from the taxation of distributions. Mutual funds provide a diversified portfolio managed by professionals, and shares are liquid, easily converted into cash by investors.
Step-by-step explanation:
The cost of investing in a mutual fund is measured by various factors, including but not limited to management fees, operational costs, and charges associated with the buying and selling of fund shares. These costs affect the overall return on investment for mutual fund shareholders. It is important to note though, that the prompt mentions taxation of distributions at the investor level which is one aspect of mutual fund costs, as investors may pay taxes on any dividends or capital gains distributions. Mutual funds offer the benefit of a diversified portfolio, which typically carries less risk than investing in individual stocks. Additionally, mutual funds are managed by professionals, sparing investors the time and effort required to manage their portfolios directly.
Investment in mutual funds has grown over time, with a significant portion of U.S. households owning mutual fund shares, often through retirement savings or pension plans. Mutual funds are considered liquid assets because they can be easily converted into cash, adding to their appeal for investors.