Mutual Fund

Question 1

What is a mutual fund?

Answer 1

A mutual fund is an investment vehicle that pools money from multiple investors to purchase a diversified portfolio of stocks, bonds, or other securities.

Question 2

True or False: Mutual funds are only available to wealthy investors.

Answer 2

False: Mutual funds are available to a wide range of investors, including those with modest amounts of capital.

Question 3

Fill in the blank: Mutual funds are managed by __________ who make investment decisions on behalf of the fund’s shareholders.

Answer 3

professional fund managers

Question 4

What is the primary benefit of investing in a mutual fund?

Answer 4

The primary benefit is diversification, which helps reduce risk by spreading investments across various securities.

Question 5

What are the two main types of mutual funds?

Answer 5

The two main types are equity funds and fixed-income funds.

Question 6

Multiple Choice: Which of the following is a characteristic of open-end mutual funds? A) Fixed number of shares B) Shares are bought and sold at market price C) Shares are bought and sold at net asset value (NAV)

Answer 6

C) Shares are bought and sold at net asset value (NAV)

Question 7

What does NAV stand for in the context of mutual funds?

Answer 7

NAV stands for Net Asset Value.

Question 8

True or False: Mutual funds can only invest in stocks.

Answer 8

False: Mutual funds can invest in a variety of assets including stocks, bonds, and other securities.

Question 9

What is the role of a fund manager?

Answer 9

The role of a fund manager is to make investment decisions, manage the fund’s portfolio, and strive to achieve the fund’s investment objectives.

Question 10

Fill in the blank: The fees charged by mutual funds for managing investments are known as __________.

Answer 10

expense ratios

Question 11

What is a closed-end mutual fund?

Answer 11

A closed-end mutual fund is a type of fund that issues a fixed number of shares that are traded on an exchange, similar to stocks.

Question 12

Multiple Choice: Which of the following is NOT a benefit of mutual funds? A) Professional management B) High liquidity C) Guaranteed returns

Answer 12

C) Guaranteed returns

Question 13

What is a prospectus in relation to mutual funds?

Answer 13

A prospectus is a legal document that provides details about a mutual fund’s investment objectives, risks, fees, and historical performance.

Question 14

True or False: Investors can redeem their shares in a mutual fund at any time.

Answer 14

True: Investors can typically redeem their shares at the current NAV.

Question 15

What does it mean when a mutual fund is ‘actively managed’?

Answer 15

An actively managed mutual fund is one where the fund manager makes specific investments in an attempt to outperform a benchmark index.

Question 16

What is a money market fund?

Answer 16

A money market fund is a type of mutual fund that invests in short-term, low-risk securities and aims to provide liquidity and preservation of capital.

Question 17

Fill in the blank: __________ funds primarily invest in stocks of small companies.

Answer 17

Small-cap

Question 18

What is the significance of a fund’s expense ratio?

Answer 18

The expense ratio measures the costs associated with managing the fund, which can affect overall returns.

Question 19

Multiple Choice: Which type of mutual fund is generally considered to be the least risky? A) Equity fund B) Bond fund C) Money market fund

Answer 19

C) Money market fund

Question 20

What are load funds?

Answer 20

Load funds are mutual funds that charge a commission or sales charge when you buy or sell shares.

Question 21

True or False: Index funds are a type of mutual fund that aims to replicate the performance of a specific index.

Answer 21

True: Index funds seek to match the performance of a market index.

Question 22

What is the primary regulatory body overseeing mutual funds in the United States?

Answer 22

The Securities and Exchange Commission (SEC).

Question 23

Fill in the blank: The __________ is the total value of all the assets held by a mutual fund.

Answer 23

total net assets

Question 24

What is a target-date fund?

Answer 24

A target-date fund is a mutual fund that automatically adjusts its asset allocation based on a specified target retirement date.

Question 25

Multiple Choice: Which of the following is a common risk associated with mutual funds? A) Market risk B) Currency risk C) Interest rate risk D) All of the above

Answer 25

D) All of the above

Question 26

Fees and charges

Answer 26

No load funds
Load funds
-front end load
- back end loads or deferred sales charge
Trailer fees
Switching fees
Management fees

Question 27

Pricing : front end loads

Answer 27

Charge or fee paid at the time of purchase on an investment. The fee is deducted from the investment amt so the actual amt of investment is less that what you give