Final answer:
Mutual funds offer several benefits, including risk diversification, accessibility for smaller investors without large cash outlays, reduced brokerage commissions due to collective buying power, and professional investment management accessible to both personal and non-trust department customers.
Step-by-step explanation:
Investing in common or collective funds, such as mutual funds, offers several benefits to participants. First, they permit a wider degree of investment and risk diversification. Diversification means buying stocks or bonds from a broad range of companies, mitigating the risk of investing in single companies that might be affected by specific adverse conditions. By pooling resources, mutual funds enable investors to own a share in a diversified portfolio, which would otherwise be costly to create on one's own.
Secondly, mutual funds are accessible as smaller accounts benefit from the ability to invest in fund units without the need for large cash outlays. This opens opportunities for individual investors who may not have significant capital to still participate in the market. Furthermore, brokerage commissions are reduced due to the collective buying power, allowing the fund to execute larger blocks of securities orders more economically.
Last but not least, investors in mutual funds benefit from the bank's or fund manager's investment expertise. This means that both personal agency accounts and non-trust department customers have access to professional management, which is especially valuable for those who lack the time or expertise to manage their investments effectively. This level of management helps in maintaining a well-balanced and strategically positioned portfolio.