Which of the following is a potential drawback of investing in sector mutual funds? Option: "They can be highly volatile due to their focus on a single sector", "They are not subject to market risks, ensuring stable returns", "They are generally less expensive than other types of mutual funds", "They offer high diversification, reducing risk"

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Which of the following is a potential drawback of investing in sector mutual funds?

"They can be highly volatile due to their focus on a single sector"

"They are not subject to market risks, ensuring stable returns"

"They are generally less expensive than other types of mutual funds"

"They offer high diversification, reducing risk"

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What is a characteristic of sector-specific mutual funds?

They are considered less risky than diversified funds

They guarantee higher returns than diversified funds

They focus on investments in specific industries or sectors

They are suitable for all investors regardless of risk appetite

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What type of investor might consider sector mutual funds a suitable investment option?

"Investors with a high risk tolerance and a belief in a specific sector's potential"

"Investors looking for guaranteed returns with minimal volatility"

"Investors primarily interested in short-term trading strategies"

"Investors seeking low-risk, fixed-income investments"

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What is the primary focus of sector mutual funds?

"Providing guaranteed returns regardless of market fluctuations"

"Investing in a diverse range of asset classes like equity, debt, and real estate"

"Investing in companies within a specific sector of the economy"

"Primarily investing in fixed-income securities like bonds"

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What is a significant advantage of index funds for risk-averse investors who prioritize stability and capital preservation in their portfolios?

Active management by experienced professionals to navigate market fluctuations

Tax-efficient structure with minimal capital gains distributions

Amplified exposure to market volatility for potential high returns

Diversification across a wide range of asset classes and sectors

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What is the primary risk associated with an undiversified portfolio?

Increased transaction expenses

Heightened overall portfolio volatility

Missed opportunities for potential gains

Complex investment management