Choose wisely. There is only one correct answer to each question.
0%
Keep studying!
Review your answers below to learn more.
1.
Why might a concentrated fund not be a wise idea for a beginning investor's first fund?
They tend to be more volatile than well-diversified funds. As a rule, beginning investors might find well-diversified funds more suitable because they are less volatile.
2.
Which is not a reason for buying your first fund through one of the big fund families?
Because their funds are always the best performers. Most of the big fund families are reliable and offer a wide range of solid funds--but they aren't always chart-toppers.
3.
Because fund families tend to have a lot of funds in them, you are assured of finding plenty of diversity to choose from.
False. Many fund families specialize in one type of fund, for example, large-growth funds. A big family isn't always a guarantee of diversity.
4.
Why might your first fund be one that favors large companies?
Because these funds tend to be less volatile than funds owning smaller companies. Funds that own large companies, in general, may not be higher returning or cheaper, but they tend to be steadier investments than those owning smaller companies.
5.
Why could it be a bad idea to buy a single-sector fund as your first fund?
Such funds are volatile. Funds focusing on only one area of the market are not necessarily poor performers or more expensive, but they tend to be less stable than funds owning stocks from various industries.
