Taxable Mutual Funds
I have mixed feelings about mutual funds.
Pros
Diversification
Mutual funds over diversification over individual stocks.
Personal Benefits
check writing, bank transfers
Regular investments
mutual funds generally do not charge to invest money in them so someone wanting to invest on a regular basis can do so with no consequence.
Reinvestment
mutual funds are handy when you want to reinvest dividends as there is no charge.
Cons
Expense ratio
Managed funds usually have a high (over 1%) expense ratio.
Unrealized capital gains
The bane for taxable funds. When you buy mutual fund shares there may be capital gains already accrued. It is possible to buy fund shares one day and the next day have to pay on capital gains you did not benefit from.
Capital gain distributions
Most mutual funds have long and short capital gain distributions at the end of the year, generated by buying and selling stocks. Even if there is no gain (or a loss) on the mutual fund you still have to pay the capital gains tax. You have no control when a fund buys or sells stocks - it is to meet their need, not yours.
Trading woes
Once purchased, you are liable for any capital gain/losses when you sell.
Reinvested dividends do not add to the cost basis as you have already paid tax on them.
Fund Manager revolving door
there is no guarantee that a star fund manager will stay with a mutual fund.