NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Concept and Role of a Mutual Fund
Which of the following is a recognised advantage of investing through a mutual fund as against direct investment in securities by a small investor?
Mutual funds pool investors' money, so even a small investor gets professional management and a diversified portfolio. They do not guarantee returns, remove market risk or exempt gains from tax, so those claims are incorrect.
- AGuaranteed returns on the invested capital
- BProfessional management and diversification even with a small amount of moneyCorrect
- CComplete elimination of market risk
- DExemption from all taxes on gains
Explanation
Mutual funds pool money, allowing small investors to access professional fund management and a diversified portfolio. Returns are never guaranteed and market risk remains. Gains are also taxable for investors as per applicable rules.
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