Which of these is not an advantage of Mutual Funds? (2024)

FAQs

Which of these is not an advantage of Mutual Funds? ›

Only Fixed return is not guaranteed in case of Mutual Funds. Rest all are advantages of Mutual Funds.

Answer. Final answer: All the options provided (investment styles and tax treatment, diversification benefits) are advantages of mutual funds; however, not mentioned is the drawback of costs like management fees which can reduce net returns.

Mutual funds provide convenient diversification and professional management through a single investment, but can have high fees, tax inefficiency, and market risk like the underlying securities.

There are serval benefits of investing in mutual funds, including professional management, diversification, liquidity, low cost, tax benefits, affordability, safety, and transparency.

Uncertain returns: Mutual funds do not offer guaranteed returns. Their value is reflected in the Net Asset Value (NAV), which fluctuates daily. A dip in NAV after your investment translates to a loss on your principal amount. Limited control: Investors have no say in where the fund manager invests.

Downside risk is an estimation of a security's potential loss in value if market conditions precipitate a decline in that security's price. Depending on the measure used, downside risk explains a worst-case scenario for an investment and indicates how much the investor stands to lose.

Mutual funds offer diversification or access to a wider variety of investments than an individual investor could afford to buy. Investing with a group offers economies of scale, decreasing your costs. Monthly contributions help your assets grow. Funds are more liquid because they tend to be less volatile.

Disadvantages To Using Mutual Funds

The biggest disadvantage is that the professional management of the fund comes at a price; mutual funds generally charge a fee based on the initial capital invested. This can add up quickly, especially if the fund is underperforming.

All funds carry some level of risk. With mutual funds, you may lose some or all of the money you invest because the securities held by a fund can go down in value. Dividends or interest payments may also change as market conditions change.

A growth mutual fund is an investment vehicle that invests in stocks with above-average growth potential. While it offers the potential for high returns, it also comes with certain disadvantages, such as higher risk, potential for market volatility, and higher fees.

What is the advantage of a mutual fund quizlet? ›

B) Mutual funds enable less risk for small investors by diversifying their portfolios. Instead of picking one stock with high risk, investors can now hold a small amount of several stocks, facing less risk.

Limitations of money market mutual fund accounts may include lower returns compared to other investment options, limited growth potential, and susceptibility to interest rate fluctuations. Additionally, these funds may have restrictions on withdrawals and minimum balance requirements.

Advantages of Money Market Mutual Funds

Safety and Stability: One of the key advantages is the investment in low-risk securities.

Only Fixed return is not guaranteed in case of Mutual Funds. Rest all are advantages of Mutual Funds.

The downside of a mutual insurer is its inability to raise capital in the public markets, which can have a dampening effect on its ability to pursue such growth objectives as a large merger or acquisition.

Mutual funds are also not a good option for people who want to exercise total control over their holdings. This is because the funds are managed by fund managers. Additionally, it is worth noting here that certain rules and regulations can dilute returns generated.

Final answer: The statement 'They are financial institutions' is not characteristic of mutual funds. Mutual funds raise money by selling shares to investors and offering professional management, but they themselves are not financial institutions. Thus, the correct option is A.

Detailed Solution. The correct answer is Depository​​.