Choose wisely. There is only one correct answer to each question.
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1.
Why are micro-cap stocks and foreign securities usually best owned through a mutual fund?
Both of the above. Micro-cap and foreign stocks are often both more difficult to analyze and less liquid, meaning that it could be best to hold such securities through mutual funds.
2.
In any given year, which type of investment is more likely to lose 20% of its value?
A U.S. stock. A higher percentage of stocks have lost 20% or more of their value in a calendar year than mutual funds.
3.
Why are U.S. stock funds generally less volatile than individual U.S. stocks?
Because they own a collection of stocks. Because they own a basket of U.S. stocks, U.S. stock funds are less volatile than individual stocks.
4.
What is the optimal mix of stocks and mutual funds?
The mix is up to you. There is no optimal mix. But think about using mutual funds to round out your stock portfolio.
5.
If you want to add mutual funds to your portfolio, where would be a good place to start?
Identify gaps in your portfolio. The first place to start is always to find what's lacking.
