Choose wisely. There is only one correct answer to each question.
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1.
Which statement is true?
Investing in stocks can be less expensive than investing in funds. It's especially true if you're planning to buy two dozen or so large, steady companies and hold them for many years. You will pay the up-front trading costs and not spend another dime until you sell. With mutual funds, however, you'll pay annual expenses.
2.
Why do stockholders have more control over their capital gains taxes than mutual fund holders do?
With stocks, there are no capital gains until the owner decides to sell her stock, and only if there is a profit. Mutual funds, however, must distribute any gains made during the year, whether fundholders want them or not. This can create a tax headache.
3.
As a rule, which is more volatile?
Stocks. Stocks are more volatile than funds.
4.
Stocks are required to distribute capital gains to their shareholders every year.
False. Mutual funds are required to do this if there are any to distribute, but stocks are not. With stocks, there are no capital gains until the owner sells them for a profit.
5.
Buying a collection of stocks can be cheaper than holding on to a mutual fund because _______.
Both of the above. The nature of the cost structure can benefit stock owners who hold their stocks for long periods.
