Question

Select the correct answer. Why might a mutual fund be a better investment than individual stocks...

Select the correct answer.

Why might a mutual fund be a better investment than individual stocks and bonds?

A.

A mutual fund guarantees dividends.

B.

Stocks are more expensive.

C.

Risk is diversified with a mutual fund.

D.

Bonds carry less risk.

E.

Stockholders can pick the stocks for their mutual fund.

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Answer #1

Why might a mutual fund be a better investment than individual stocks and bonds?

Answer is : C. Risk is diversified with a mutual fund.

A mutual fund is taken care by professionals who select the assets for the mutual fund after due consideration to their risk, return , beta , systematic & non systematic risk. So when amutual funds uses various assets for the portfolio the risk gets diversfied away. and hence it is much safer than the indivividual stocks or bonds. Also people do not get to chose the individual stocks and bonds in mutual funds.

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