What is the primary function of a mutual fund?

To pool money from investors and invest it in various financial instruments To provide loans to small businesses To facilitate direct stock trading for individual investors To offer high-interest savings accounts

What is a key difference between investing in mutual funds and direct equity?

Mutual funds offer professional management, while direct equity requires individual expertise Mutual funds are only available to institutional investors, while direct equity is open to everyone Mutual funds focus on bonds, while direct equity focuses on stocks Mutual funds are riskier than direct equity investments

What is a potential advantage of investing in mutual funds over direct equity for someone with limited time?

Mutual funds handle investment decisions, relieving the individual of constant monitoring Mutual funds guarantee higher returns than direct equity investments Mutual funds offer lower fees and expenses compared to direct equity trading Mutual funds allow for immediate withdrawal of funds without any penalties

How do mutual funds address the issue of high stock prices for small investors?

Mutual funds allow investors to purchase fractions of shares, making expensive stocks accessible Mutual funds negotiate lower stock prices for their investors Mutual funds only invest in low-priced stocks to cater to small investors Mutual funds provide loans to investors to purchase expensive stocks

What is a key consideration for investors regarding the fees associated with mutual funds?

Investors should compare expense ratios and choose funds with reasonable fees Mutual funds are legally required to operate without any fees or expenses Investors should prioritize funds with the highest fees as they indicate better performance Fees are irrelevant as they are automatically deducted from investment returns

How do mutual funds mitigate risk compared to direct equity investments?

Fund managers diversify investments across various stocks and sectors, adhering to risk management guidelines Mutual funds guarantee a minimum return, eliminating the risk of losses Mutual funds only invest in government bonds, considered the safest investment option Mutual funds insure investments against market fluctuations

What is a potential benefit of long-term investment in both mutual funds and direct equities?

Long-term investment can potentially yield higher returns over time Long-term investment guarantees a fixed return regardless of market conditions Long-term investment eliminates the need for diversification Long-term investment allows investors to avoid paying taxes on returns