NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Concept and Role of a Mutual Fund
Which of the following best describes the principal advantage that a mutual fund offers a small investor compared with investing directly in a handful of securities?
The main advantage is professional management and diversification achieved by pooling many investors' money. A small investor gets access to a broad portfolio managed by experts. Mutual funds carry market risk, offer no guaranteed returns, and redeem units at NAV-based prices.
- AA guaranteed minimum return on the amount invested
- BProfessional management and diversification through pooling of money from many investorsCorrect
- CExemption from all market risk due to SEBI regulation
- DAssured liquidity at a price higher than NAV
Explanation
A mutual fund pools money from many investors and invests in a diversified portfolio run by professional fund managers, which a small investor would find hard to replicate. Mutual funds do not guarantee returns, do not remove market risk, and redemption is at NAV-related prices.
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