Exam 15: Mutual Funds: An Easy Way to Diversify

A(n) ________ is a fixed pool of securities, generally municipal bonds, with each unit representing a proportionate ownership in that pool.

Each individual mutual fund hires an investment advisor, generally from the management company, who oversee the particular fund. How is this advisor paid?

Bernie has followed the three steps to begin mutual fund investing and is ready to make the purchase. What are his choices in buying?

Tabitha is just beginning to develop her financial portfolio. She does not want to pay commissions to purchase shares in mutual funds, as her friend you would advise her to invest her dollars in ________ funds.

A mutual fund's expense ratio compares the fund's expenses to its total assets.

Because mutual funds trade in such large quantities, they pay far more in terms of commissions.

The process of buying a mutual fund involves determining your investment goals, identifying funds that meet your objectives, and evaluating those funds.

Brian and Kallie are looking for investments that provide steady income to live on, moderate growth in capital, and moderate stability in their investments. They should look into balanced mutual funds.

What are ETF's and what are their advantages?

Which of the following mutual fund services is similar in concept to compounding and the time value of money?

Mutual funds give smaller investors the same ability to diversify and reduce risk as big investors with a great deal of money have.

When you own shares of a mutual fund, you can choose to have the dividend and capital gains distributions paid directly to you in the form of cash or you can choose to have them reinvested into additional shares of the fund itself.

You may be charged a small transaction fee when you buy no load funds through a "mutual fund supermarket."

Explain how sales loads and fund expenses can negatively impact your return on investment in a mutual fund.

Bond funds differ from individual bond purchases in that

By law, a bond fund may not invest in international securities.

Back-end load mutual funds charge a commission when the investor sells the mutual fund.

What are the two broad types of risks that are associated with investing? Can you avoid them by investing in Mutual Funds?

For an investor with little time or desire to follow the markets, a life cycle fund would be an appropriate choice for their retirement savings.

One disadvantage of mutual fund investments is that they are illiquid.