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Funds 101: Mutual Fund Basics

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1.
The mutual fund advisor may play additional roles besides that of advisor.
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True. It may also be the transfer agent.
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 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.
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.
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.