Compounding is attained in mutual fund investing through

Question

Quizplus · Accepted Answer

Compounding in mutual fund investing is often achieved through automatic reinvestment of dividends. When dividends are reinvested, they are used to purchase additional shares of the mutual fund, which can then generate more income and potentially increase in value over time. This allows investors to benefit from the power of compounding, where their earnings can earn additional earnings. Frequent buying and selling of shares (A) can create tax consequences and fees that can hinder compounding. Minimizing account fees (B) can help improve returns, but it alone does not lead to compounding. Using leverage (C) can increase both returns and risks, and may not be practical or suitable for all investors.

Compounding Is Attained in Mutual Fund Investing Through