Question

Mutual Funds offer the small investor all of the following, EXCEPT:

a) Diversification
b) Access to Mass Markets
c) Ability to Choose Individual Securities
d) Professional Management

Answer 1

The correct answer is c) Ability to choose individual securities

Mutual funds are generally suitable for retail investors. It is highly regulated where the fund managers manage the corpus.

A small investor uses his money to buy units of fund. He does not get the opportunity to select individual securites.He invests in a fund which is managed by professional fund managers and such funds generally consists of securities which is based on the decisions of the fund manager.

They generally hold a diversified portfolio so that there is high systematic risk and low unsystematic risk.

In return for managing the fund the managers charges fees. This fees is generally not linked to performance.

Mutual funds generally do not collapse like hedge funds.