Question

Suppose that you believe there will soon be a boom in the tech sector in the United States, causing the profits of tech companies to soar. Which of the following mutual funds would best let you take advantage of this?

A) A mutual fund whose portfolio replicates the NASDAQ Composite Index

B) A mutual fund whose portfolio replicates the S&P 500 Index

C) A mutual fund whose portfolio replicates the Dow Jones Industrial Average

D) A mutual fund whose portfolio holds low-risk corporate bonds

Answer 1

Option A) A mutual fund whose portfolio replicates the NASDAQ Composite Index

The NASDAQ Composite Index's is more weighted towards techology stocks out of which 46.40% registered companies are in technology sector as of May, 2018. So, if you believe that there would be soon a boom in the tech sector in the United States, causing the profits of tech companies to soar, you would to invest in a mutual fund whose portfolio is heavily weighted towards the technology sector similar to the NASDAQ Composite Index.