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Personal Finance: Mutual Funds
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Why Invest in Mutual Funds?
A mutual fund provides diversification through exposure to a multitude of stocks. The reason that owning shares in a mutual fund is recommended over owning a single stock is that an individual stock carries more risk than a mutual fund. 
 

Personal Finance: Mutual Funds
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25 Questions

1. Bond funds differ from individual bond purchases in that
2. With target retirement funds the only decision you have to make is when you plan to retire.
3. When selecting a mutual fund, since past performance doesn't necessarily predict future results, you don't need to look at the fund's past performance.
4. A sector fund is a mutual fund that tries to maximize the degree of diversification.
5. Which of the following will affect your capital gains liability?
6. When you own shares of a mutual fund, you can choose to have the dividend and capital gains distributions paid directly to you in the form of cash or you can choose to have them reinvested into additional shares of the fund itself.
7. By law, a bond fund may not invest in international securities.
8. Tabitha is just beginning to develop her financial portfolio- She does not want to pay commissions to purchase shares in mutual funds, as her friend you would advise her to invest her dollars in ________ funds.
9. The mutual fund that invests in Treasury bills and very short-term notes and is considered practically risk free is the
10. An aggressive growth fund is an appropriate choice for an investor looking for capital gains.
11. A unit investment trust usually invests in ________ and an REIT always invests in ________.
12. Which of the following funds would be the most appropriate investment for the average small investor?
13. Bonnie and James are retired- They wish to continue to invest in their portfolio and are seeking income instead of growth- Which should they invest in?
14. A(n) ________ is a mutual fund company that has the ability to issue as many shares as investors are willing to purchase.
15. The process of buying a mutual fund involves determining your investment goals, identifying funds that meet your objectives, and evaluating those funds.
16. Donel is investing in a mutual fund that really is not as diversified as other funds- It may enjoy good capital gains but is also much riskier when it comes to unsystematic risk- This fund is called a(n) ________ fund.
17. Money market mutual funds
18. Bernie has followed the three steps to begin mutual fund investing and is ready to make the purchase- What are his choices in buying?
19. Hedge fund managers charge very high fees, generally taking ________ of the assets under management (even when the fund loses money) along with ________ of the profits
20. 12b-1 fees are marketing expenses for the mutual fund that are passed on to the fund shareholders.
21. One of the advantages of municipal bond funds is that
22. All distributions from a mutual fund, whether paid out or reinvested, are taxable in the year in which they occur.
23. You may be charged a small transaction fee when you buy no load funds through a 'mutual fund supermarket.'
24. Mutual fund fees and expenses will negatively affect the return you receive on your investment.
25. Zippo Mutual Fund is one of your best performers- It just announced a year-end distribution of $2.50 per share in capital gains and $4.25 in dividends- Assuming the NAV increased from $31.50 to $43.75, calculate your total annual return.

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