As a small investor, Bernie Lo has decided to invest in the Alpha Fund. This mutual fund only invests in the common stock of companies located in Asia. What is one benefit of investing in mutual funds?

Question

Quizplus · Accepted Answer

One benefit of investing in mutual funds is that they usually offer more diversification than individual stock investing. By investing in a mutual fund, an investor gains exposure to a variety of different securities, which can help to spread out the risk of investing in any one company or industry. This can potentially lead to more consistent returns. Options A, C, and D are incorrect; mutual funds do not guarantee tax-free capital gains, they can be actively or passively managed, and they are not guaranteed by the SEC.

As a Small Investor, Bernie Lo Has Decided to Invest