Investment Fundamentals

What are the different types of mutual funds?

• equity funds, debt funds, hybrid funds, money market funds

• commodity funds

• index funds

• real estate funds

Explain the concept of investment risks.

• Investment risks are the potential for financial loss or underperformance associated with investing in assets due to factors like market volatility, economic changes, and specific company risks.

• Investment risks are always predictable and can be completely avoided.

• Investment risks do not impact the performance of assets.

• Investment risks are only associated with investing in real estate.

Differentiate between money market and capital market.

• Money market is only accessible to large corporations, while capital market is open to individual investors.

• Money market involves trading commodities, while capital market involves trading real estate.

• Money market focuses on short-term debt securities, while capital market focuses on long-term securities like stocks and bonds.

• Money market deals with physical currency, while capital market deals with digital currency.

How do mutual funds manage risks?

• Mutual funds manage risks by following the advice of inexperienced individuals.

• Mutual funds manage risks by only investing in one type of asset.

• Mutual funds manage risks through diversification and active management by professional fund managers.

• Mutual funds manage risks by randomly selecting investments.

What is a money market fund?

• A money market fund is a type of cryptocurrency investment

• A money market fund is a long-term stock investment

• A money market fund is a high-risk venture capital fund

• A money market fund is a type of mutual fund that invests in high-quality, short-term debt instruments and cash equivalents.

Describe the characteristics of a capital market.

• Limited regulation

• Characteristics of a capital market include liquidity, transparency, regulation, and the presence of various financial instruments.

• Restricted access to financial instruments

• High risk, low return

What are the key factors to consider for risk management in mutual funds?

• Investment amount, fund size, fund age, fund category, fund popularity, fund liquidity

• Diversification, investment objectives, expense ratios, historical performance, fund manager expertise, market conditions

Name one type of mutual fund that focuses on high-risk investments.

• Aggressive Growth Fund

• Index Fund

• Income Fund

• Balanced Fund

How can investors mitigate risks in mutual funds?

• Not reviewing or rebalancing the portfolio

• Diversifying investments, reviewing and rebalancing portfolio, investing in low-cost index funds, considering risk tolerance

• Putting all money in one high-risk fund

• Ignoring risk tolerance and investing aggressively

What role does diversification play in reducing investment risks?

• Diversification increases investment risks by concentrating investments in one asset.

• Diversification has no impact on investment risks.

• Diversification only reduces risks for short-term investments.

• Diversification reduces investment risks by spreading investments across different assets.