Mutual Funds

Question 1

Financial vehicle that pools assets from shareholders to invest in securities

Answer 1

Mutual funds

Question 2

Structures and maintained to match the investment objectives in its prospectus

Answer 2

Mutual fund portfolio

Question 3

Features of mutual funds

Answer 3

Professional management
Diversification
Affordability
Liquidity

Question 4

Benefits of investing in mutual funds

Answer 4

Dividend payments
Capital gains distributions
Increased net asset value

Question 5

Main types of mutual funds

Answer 5

Stock or equity funds
Bond fund
Index fund
Balance fund
Money market fund

Question 6

For asset allocation fund

Answer 6

Balance fund

Question 7

For cost-sensitive investors

Answer 7

Index fund

Question 8

Investors can sell the shares back to the fund

Answer 8

Mutual funds are redeemable

Question 9

Contains information about mutual funds investment objectives, risk, performance and expenses

Answer 9

Prospectus

Question 10

Pros of mutual funds

Answer 10

Liquidity
Diversification
Minimal investment requirements
Professional management
Variety of offerings

Question 11

Cons of mutual funds

Answer 11

High fees, commissions and other expenses
Large cash presence in portfolios
No PDIC coverage
Difficulty in comparing funds

Question 12

Risks of mutual funds

Answer 12

Market risk
Credit risk
Regulatory risk
Non- guarantee
Large transaction risk
Fund manager risk