ECONOMICS
SAVING AND INVESTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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a bond
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real estate
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a large company
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mutual funds
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Detailed explanation-1: -Mutual funds let you pool your money with other investors to “mutually” buy stocks, bonds, and other investments. They’re run by professional money managers who decide which securities to buy (stocks, bonds, etc.) and when to sell them. You get exposure to all the investments in the fund and any income they generate.
Detailed explanation-2: -Diversifying your portfolio in the stock market is a good idea for investors because it decreases risk by ensuring that no single company has too much influence over the value of your holdings. Owning more stocks confers greater stock portfolio diversification, but owning too many stocks is impractical.
Detailed explanation-3: -If you invest a modest sum in a large number of different mutual fund schemes, you will not likely receive the benefits of diversification nor will you be able to maximise your gains. This is especially important to keep in mind when you are only investing a small sum.
Detailed explanation-4: -Mutual Funds A mutual fund is a pool of many investors’ money that is invested broadly in a number of companies.