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Funds 101: Mutual Fund Basics

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1.
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.
2.
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.
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.
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.
5.
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.