Dilution of profit: Since the essence of a mutual fund is lowering the risk by diversification, it also leads to reduction in profits because risk is directly related to return.
Lack of control: The funds are managed by fund managers. Hence, individual investors do not have any control over the securities or assets in which their money is being invested.
Expense Ratio: This is the cost that the investors need to pay to the mutual fund company for managing funds. This cost can be saved when the investors directly make investments.
Market Risk: Also called systematic risk, it is the risk of loss arising due to changes in market prices of securities. This can even lead to the loss of capital if prices fall too much.
Poor Trade Execution: When an investor buys or sells a fund, the trade will always be executed at the closing price of the market, irrespective of the time of placement of order. Those who look for faster execution are in for disappointment.
