Question

Which of the following are three key advantages of mutual funds? Multiple Choice diversification, taxes, high initial investments low initial investments, professional management, diversification liquidity, high initial investments, diversification professional management, high initial investments, taxes costs, diversification, liquidity

Answer 1

Answer:

The answer is: Which of the following are three key advantages of mutual funds? low initial investments, professional management, diversification

Explanation:

Mutual funds are by far the most popular investment choice (at least in the US). Their main advantages are:

• risk reduction (diversification)
• professional management
• low initial investments are possible
• dividend reinvestment
• high liquidity

Although they also have some serious disadvantages like:

• high fees and expense ratios
• tax inefficient (especially capital gains)