#1
Which of the following is a primary advantage of investing in mutual funds?
Professional management
ExplanationMutual funds offer professional management, allowing investors to benefit from expertise in selecting and managing investments.
#2
What does NAV stand for in the context of mutual funds?
Net Asset Value
ExplanationNAV represents the per-share value of a mutual fund's holdings, indicating its current market price.
#3
What does SIP stand for in the context of mutual funds?
Systematic Investment Plan
ExplanationSIP involves investing a fixed amount regularly in mutual funds, helping in rupee cost averaging and disciplined investing.
#4
Which type of mutual fund typically invests in stocks of companies with a history of paying high dividends?
Income funds
ExplanationIncome funds primarily invest in dividend-paying stocks, providing regular income to investors.
#5
What is the minimum investment required to start investing in most mutual funds?
No minimum requirement
ExplanationMany mutual funds have no minimum investment requirement, allowing investors to start with small amounts.
#6
Which of the following is NOT a factor to consider when selecting a mutual fund?
Fund manager's favorite color
ExplanationThe fund manager's favorite color is not a relevant factor when selecting a mutual fund; instead, factors like performance, fees, and risk should be considered.
#7
Which investment strategy involves investing in a mix of asset classes like stocks, bonds, and cash equivalents?
Asset allocation
ExplanationAsset allocation strategy involves diversifying investments across various asset classes to manage risk and optimize returns.
#8
What is the 'expense ratio' of a mutual fund?
The annual fee charged to investors
ExplanationExpense ratio represents the annual fee charged by a mutual fund to cover operating expenses, expressed as a percentage of total assets.
#9
What is the main risk associated with investing in mutual funds?
Market risk
ExplanationMutual funds are subject to market risk, meaning their returns can fluctuate based on market conditions.
#10
Which ratio measures the consistency of a mutual fund's returns over time?
Sharpe ratio
ExplanationThe Sharpe ratio evaluates a mutual fund's risk-adjusted performance, indicating the consistency of returns relative to the risk taken.
#11
What does the term 'load' refer to in mutual funds?
Sales charge
ExplanationLoad in mutual funds refers to the sales charge or commission paid by investors when buying or selling shares.
#12
What is the primary goal of a balanced fund?
All of the above
ExplanationBalanced funds aim to achieve multiple objectives, including income generation, capital appreciation, and risk diversification.
#13
Which of the following is NOT a type of mutual fund?
Fixed deposit funds
ExplanationFixed deposit funds are not a type of mutual fund; they are investment products offered by banks.
#14
In which phase of the business cycle are growth funds likely to perform best?
Expansion
ExplanationGrowth funds typically perform well during the expansion phase of the business cycle, benefiting from increasing economic activity.
#15
Which type of mutual fund aims to replicate the performance of a specific market index?
Index funds
ExplanationIndex funds track specific market indices like the S&P 500, aiming to replicate their performance with minimal expenses.
#16
Which of the following investment strategies involves buying and holding securities for the long term, regardless of market fluctuations?
Passive management
ExplanationPassive management involves holding investments for the long term, typically tracking market indices, with minimal buying and selling.
#17
In the context of mutual funds, what does the term 'load' refer to?
The cost of buying or selling shares
ExplanationLoad in mutual funds refers to the cost incurred by investors when buying or selling shares, typically in the form of sales charges.