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    Question

    Which of the following statements about mutual funds is/are correct?

    1)Mutual funds are a type of investment where investors pool their money together to invest in a diversified portfolio of securities.

    2)Mutual funds are always managed by professional fund managers who make investment decisions on behalf of the investors.

    3)Target date fund is a type of mutual fund.

    A 1 and 2 only Correct Answer Incorrect Answer
    B 1 and 3 only Correct Answer Incorrect Answer
    C 2 and 3 only Correct Answer Incorrect Answer
    D 1, 2 and 3 Correct Answer Incorrect Answer
    E 3 only Correct Answer Incorrect Answer

    Solution

    Statement 1 is correct as mutual funds are a type of investment where investors pool their money together to invest in a diversified portfolio of securities. Statement 2 is incorrect as while most mutual funds are managed by professional fund managers, there are some funds that are managed by individual investors. Most mutual funds fall into one of four main categories – money market funds, bond funds, stock funds, and target date funds. Each type has different features, risks, and rewards. 

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