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Funds 101: Mutual Fund Basics

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1.
Diversification spreads risk among several different investments.
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True. Each investment has its own risk profile.
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.
When a mutual funds individual holdings make money, so do the mutual funds shareholders.
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True. Earnings are passed from the holdings to the funds shareholders.
4.
The mutual fund advisor may play additional roles besides that of advisor.
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True. It may also be the transfer agent.
5.
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.