Question

13

a. Mutual funds

• restrict frequent buying and selling of assets in the fund.

• have an international agenda.

• pool investors' money and buy a collection of stocks or bonds.

• require a fee to join.

b. Passively managed mutual funds

• can be classified according to the type of asset or according to the industry sector.

• vary according to a manager’s discretion.

• require a fee to join sector funds.

• include various types of government securities.

c. Mutual funds are popular because they

• require the investor to closely monitor the portfolio.

• diversify risk.

• can be risky.

• have idiosyncratic risk.

Answer 1

a) "C"

Mutual funds pool the investors money to buy assets in the market. They invest in various different sectors to reduce the risk to the investors.

b) "A"

passively managed mutual funds are index based and are not managed by any managed but automatically selected by the index based system, it is different for every industry.

c) "B"

They are popular because they diversify risk.