NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Concept and Role of a Mutual Fund
Which of the following is a feature of a mutual fund that allows an investor with a small sum to hold a share in a broad basket of securities?
Pooling of funds is the feature that lets small investors share in a diversified portfolio. A mutual fund gathers money from many investors and invests it collectively, so each unit holder owns a proportionate interest in the whole portfolio rather than individual securities.
- APooling of fundsCorrect
- BGuaranteed returns
- CFixed maturity
- DDirect ownership of individual securities by each investor
Explanation
A mutual fund collects money from many investors and invests it in a diversified portfolio, so even small investors get exposure to many securities. Returns are not guaranteed and investors hold units, not the underlying securities directly.
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