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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Concept and Role of a Mutual Fund

Which of the following best describes the advantage of 'pooling' in a mutual fund for a small investor?

Pooling lets a small investor gain exposure to a diversified portfolio of securities with a modest investment, because many investors' money is combined. It does not guarantee returns, give tax exemption, or provide direct voting rights on each holding.

  1. AGuaranteed minimum return on the amount invested
  2. BAccess to a diversified portfolio of securities with a small investmentCorrect
  3. CComplete exemption from tax on all gains
  4. DRight to vote directly on each security held by the scheme

Explanation

Pooling of many investors' money lets a small investor own a share of a diversified portfolio that would be costly to build individually. Mutual funds do not guarantee returns, and tax exemption is not a feature of pooling.

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