Understanding Mutual Funds

What is a mutual fund?

• A single stock investment

• A government bond

• A type of savings account

• A professionally managed investment pooling money from investors

What is one of the main benefits of mutual funds?

• No management required

• High transaction fees

• Guaranteed returns

• Instant diversification

Which type of mutual fund invests in companies with potential for growth?

• Value Funds

• Income Funds

• Growth Funds

• Bond Funds

What is a bond mutual fund?

• A fund that invests in stocks

• A fund that invests in real estate

• A fund that pools money to purchase bonds

• A fund that invests in commodities

What is the role of a mutual fund manager?

• To provide loans to investors

• To insure the fund against losses

• To sell stocks directly to investors

• To manage and adjust the fund's investments

What is an index fund designed to do?

• Invest only in international stocks

• Mirror the performance of a market index

• Focus on high-risk investments

• Outperform the stock market

What is a characteristic of aggressive growth funds?

• They focus on stable, large companies

• They only invest in government bonds

• They are low-risk investments

• They have high potential for both gains and losses

What is a hybrid mutual fund?

• A fund that combines stocks and bonds

• A fund that only invests in technology stocks

• A fund that invests in real estate

• A fund that focuses on short-term gains

What is the purpose of diversification in mutual funds?

• To increase transaction fees

• To concentrate investments in one company

• To spread risk across different investments

• To guarantee high returns

What is a sector fund?

• A fund that invests in a specific industry

• A fund that invests in all available stocks

• A fund that only invests in bonds

• A fund that focuses on international markets