Question 1

The mutual fund company owns the investments it makes,and the mutual fund investors own the mutual fund company.

Accepted Answer

The answer of The mutual fund company owns the investments...

Question 2

Mutual funds are readily available to people saving for retirement through 401(k)plans and IRAs.

Accepted Answer

Mutual funds are commonly offered as investment options in 401(k) plans and can also be purchased through IRAs.

Question 3

Mutual funds will accept direct transfers of a portion of a worker's paycheck towards the purchase of shares in the mutual fund.

Accepted Answer

Many mutual funds offer the option of direct deposit, allowing investors to transfer a portion of their paycheck towards the purchase of shares in the fund. This is a convenient way to regularly invest and build a long-term portfolio.

Question 4

Shares in an open-end mutual fund can be liquidated almost immediately simply by communicating with the company via phone,on-line or in writing.

Accepted Answer

Open-end mutual funds are designed to be liquid investments, meaning that investors can buy and sell shares at any time. This is facilitated by the fact that the fund company will redeem shares on demand, usually at the current net asset value (NAV) per share. Investors can communicate their desire to sell their shares via phone, online, or in writing, and the redemption process typically takes one to three business days.

Question 5

Switching between mutual funds in the same family of funds can typically be done for no fee.

Accepted Answer

Switching between mutual funds in the same family of funds is usually allowed for free, although there may be some restrictions on how often this can be done. However, it's always best to check with the specific fund company to confirm any potential fees or limitations.

Question 6

Individuals trade open-end fund shares on an organized exchange.

Accepted Answer

Unlike closed-end funds, open-end fund shares are not traded on organized exchanges. Instead, investors buy and redeem shares directly with the fund at their net asset value (NAV) per share.

Question 7

You redeem your shares in an open-end mutual fund by selling them to another investor.

Accepted Answer

When you redeem shares in an open-end mutual fund, you sell them back to the fund itself, not to another investor.

Question 8

Individuals trade closed-end fund shares much like the common stock of a corporation.

Accepted Answer

Closed-end funds are traded on stock exchanges, and investors can buy and sell shares through brokers, just like stocks. The price of closed-end fund shares fluctuate throughout the trading day based on supply and demand, rather than just the net asset value (NAV) of the underlying securities like open-end mutual funds.

Question 9

Investing in mutual funds that are part of the same family of funds can simplify one's finances.

Accepted Answer

Investing in mutual funds that are part of the same family of funds can simplify one's finances because investors can have a single account and easily transfer money between funds without incurring fees. They can also benefit from potential discounts on fees and expenses due to holding multiple funds within the same family.

Question 10

Electronic funds transfers (EFTs)can be used to make regular investments in mutual funds from a checking or savings account.

Accepted Answer

EFTs allow for automatic and regular transfers from a checking or savings account to a mutual fund, making it a convenient option for investors.

Question 11

Closed-end mutual fund shares are actively traded like common stocks and bonds,primarily on the New York Stock Exchange.

Accepted Answer

Closed-end mutual fund shares are listed on the stock exchange and can be bought and sold like other securities.

Question 12

A beneficiary designation is automatically set up in a mutual fund account without having to complete any additional forms.

Accepted Answer

A beneficiary designation in a mutual fund account requires the account holder to complete additional forms specifying who the beneficiaries are; it is not automatically set up.

Question 13

When you buy shares in a mutual fund you are trusting that the fund's investment advisers share your investment objectives.

Accepted Answer

When you invest in a mutual fund, you are entrusting the fund's investment advisers to manage the fund's assets in a manner consistent with the fund's stated investment objectives. In other words, you are trusting that the fund's advisers share your investment objectives.

Question 14

Mutual funds have a low- or no-cost exchange privilege that permits mutual fund shareholders to easily swap shares on a dollar-for-dollar basis for shares in another mutual fund managed by the same mutual fund family.

Accepted Answer

Mutual funds do offer an exchange privilege which allows shareholders to swap shares for another mutual fund managed by the same family on a dollar-for-dollar basis with a low or no-cost.

Question 15

A mutual fund family is a group of individual funds under the same management company.

Accepted Answer

A mutual fund family is indeed a group of individual funds that are managed by the same company or management team.

Question 16

A beneficiary designation enables the shareholder to name one or more beneficiaries so that at the shareholder's death the proceeds go to the beneficiaries after going through probate.

Accepted Answer

A beneficiary designation allows the proceeds to bypass probate and go directly to the named beneficiaries upon the shareholder's death.

Question 17

A mutual fund can be arranged to keep its proceeds out of probate,in case of the owner's death.

Accepted Answer

A mutual fund can be set up to avoid probate by designating beneficiaries or by establishing the fund as a trust. This can be beneficial for estate planning purposes, as it allows the fund to pass directly to the designated beneficiaries without going through probate court.

Question 18

Mutual funds have distinct features that make this form of investing both unique and investor-friendly.

Accepted Answer

Mutual funds allow investors to diversify their portfolio, offer professional management, have lower transaction costs, and allow investment with small amounts of money. These features make them unique and investor-friendly.

Question 19

A small percentage of mutual fund investors take advantage of automatic reinvestment of the current income received from their mutual fund.

Accepted Answer

A large percentage of mutual fund investors take advantage of automatic reinvestment plans to reinvest their dividends and capital gains, which helps in compounding their investments over time.

Question 20

ETFs act like traditional open-end mutual funds in that they can be bought and sold directly from the mutual fund.

Accepted Answer

ETFs are bought and sold on stock exchanges, not directly from a mutual fund company. They can also be bought and sold through a brokerage account, just like individual stocks.

Quiz 15: Investing Through Mutual Funds