Diversification and Mutual Funds

What is the purpose of diversification in investments?

• To increase the overall risk

• To focus on a single asset

• To reduce volatility

• To guarantee profits

What does the term "Volatility" refer to in the context of a market or investment?

• The certainty that a market or investment will not change in value.

• The likelihood that a market or investment will change in value.

• The process of a company going public through an IPO.

• The strategy of diversifying an investment portfolio.

Can volatility be considered good for investors?

• Yes, it can only be good.

• No, it is always bad.

• Yes, it can be good or bad.

• Volatility is not relevant to investors.

What is "Capitalization" in the context of a company's financial value?

• The total debts of a company.

• The process of converting assets into capital.

• A measure of a company's financial value.

• The yearly revenue of a company.

What is the nature of mutual funds that makes them a tool for diversification?

• They are high-risk investments

• They are managed by professional investors

• They are already diversified by nature

• They require large amounts of money to invest

Why might it be cheaper to invest in mutual funds compared to buying stocks individually?

• Mutual funds offer higher returns

• Mutual funds are less risky

• Mutual funds allow you to pool money with other investors

• Mutual funds are only available to professional investors

What type of companies do growth stock mutual funds typically invest in?

• Large-cap companies

• Small-cap companies

• Medium-sized companies

• International companies

Which category of mutual funds is characterized as being unpredictable with high risk and high return?

• Growth

• International

• Growth & Income

• Aggressive Growth

Which mutual fund category is considered to be the most predictable in performance?

• International

• Growth & Income

• Growth

• Aggressive Growth

What type of stocks do Growth and Income Stock Mutual Funds typically purchase?

• Stocks of small, new companies

• Stocks of large, reputable companies

• Stocks of high-risk companies

• Stocks of international companies