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Funds 101: Mutual Fund Basics

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1.
If you buy mutual fund shares from another investor instead of from the fund itself, you are buying _______ shares.
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Closed-end. Closed-end fund shares are traded between investors and cannot be bought from the fund itself, except when it sells shares for the very first time.
2.
It is possible to buy shares of a mutual fund directly from the fund instead of through a broker.
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True. Although you can buy shares through a broker, most funds also let you buy shares directly from the funds themselves.
3.
A mutual fund is a(n) _______.
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Package of several types of securities. Although some mutual funds invest only in stocks or bonds, mutual funds as a whole are open to several types of securities.
4.
Which of the following does diversification do for a mutual fund?
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Spread risk. By spreading risk among several items in a fund, you can reduce the damage that a downturn in a few of them can cause.
5.
Which of the following pieces of information on portfolio managers is included in a mutual fund prospectus?
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Employment history. This provides a sense of the managers' experience.