Investing 101: Funds

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What is a mutual fund?

Back

A type of investment that pools money from multiple investors to purchase a diversified portfolio of assets.

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What is an index fund?

Back

A type of investment that tracks the performance of a specific market index.

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What is an ETF?

Back

A type of investment that trades on an exchange like a stock.

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Which investment vehicle is best suited for investors who want to achieve broad market exposure with low fees? Options: Mutual funds, Index funds, ETFs

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ETFs

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Which investment vehicle typically has the lowest expense ratio? Options: Mutual Funds, Index Funds, ETFs

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ETFs

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What is the difference between a mutual fund and an ETF?

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Mutual funds can only be bought or sold at the end of the trading day, while ETFs can be traded throughout the day.

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How are active investing and passive investing different?

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Active investing is typically done by a fund manager trying to beat the market while passive investing typically involves investing in a popular index like the S&P 500.

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A commonly used strategy to minimize investing risk is...

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Diversifying across asset classes and within each asset class

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Which of the following explains why risk is not always bad when it comes to investing? Insurance will cover your investing losses, As risk increases, so does the possibility of greater returns, Robo-advisors eliminate all risk, Gains realized from higher-risk investments are untaxed

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As risk increases, so does the possibility of greater returns

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Which of the following is a characteristic of dollar-cost averaging?

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Dollar-cost averaging involves consistently investing small amounts of money over long periods of time.