NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Concept and Role of a Mutual Fund
Which of the following is an advantage of investing in a mutual fund compared with buying individual stocks directly?
The advantage is professional management and diversification even with a small amount. Pooling lets investors hold a spread of securities managed by experts. Mutual funds do not guarantee returns or capital and carry market risk like other market investments.
- AGuaranteed protection of capital
- BProfessional management and diversification even with a small investmentCorrect
- CAssured returns higher than bank deposits
- DFreedom from all market risk
Explanation
Mutual funds pool money from many investors so that even small investors get diversification and professional fund management. They do not guarantee capital or returns and remain subject to market risk.
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