Molly is a novice investor with a small amount of money to invest. She consults with a professional investor who informs her that her best choice is to invest in a pool of funds from many investors that will be allocated to various investments. What investment option does this scenario best describe?

Question

Quizplus · Accepted Answer

This scenario best describes mutual funds, which are pools of funds from many investors that are managed by professionals who allocate the pooled dollars among various investments that meet the investors' requirements. For a novice investor with a small amount of money to invest, the best choice is mutual funds. Although even small investors have access to the market for individual securities, professional investors spend 100 percent of their time following the market and are likely to have more information at their disposal to aid in making buy and sell decisions.

Molly Is a Novice Investor with a Small Amount of Money