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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.
The holdings and sectors within a mutual fund always rise and fall together.
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False. Due to the diversification of mutual fund holdings, some positions may be positive while others may not be.
3.
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.
4.
In the world of mutual funds, what are outstanding shares?
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Shares owned by the public. To be "outstanding" is to be in the public's possession.
5.
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.