What Is a Mutual Fund?

What is a mutual fund?

• A single stock chosen by an individual investor.

• A portfolio of assets like stocks and bonds managed by professionals.

• A type of savings account with a fixed interest rate.

• A government-issued bond used to fund public projects.

What is a common characteristic of actively managed mutual funds?

• They typically have lower management fees due to minimal oversight.

• They aim to replicate the performance of a specific market index.

• They involve experts who actively select stocks and bonds, often resulting in higher fees.

• They are primarily used for short-term speculative trading.

What is a key difference between actively managed and passively managed mutual funds?

• Actively managed funds invest only in bonds, while passively managed funds invest only in stocks.

• Actively managed funds involve experts picking specific assets, while passively managed funds track an index.

• Passively managed funds have higher management fees than actively managed funds.

• Actively managed funds are only available to institutional investors, while passively managed funds are for individual investors.

Which of the following best describes a passively managed mutual fund?

• It is managed by a single individual who makes all investment decisions.

• It attempts to outperform the market by frequently buying and selling assets.

• It is an investment portfolio that tracks a broad market index, like the S&P 500.

• It focuses exclusively on high-risk, high-reward investments.