Funds Intermediate: Asset Allocation Mutual Funds

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1.
A growth or aggressive-growth mutual fund typically invests almost entirely for _______.
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Capital appreciation. The growth or aggressive-growth fund typically invests almost entirely for capital appreciation despite that the road to long-term growth is paved with short-term risks and possible losses in principal.
2.
Mutual funds are a poor choice with which to attempt asset allocation.
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False. One of the best ways to diversify a given sum of money is to invest it into one or more mutual funds.
3.
Investors using the multifund approach to asset allocation are interested in _______.
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Taking advantage of particular fund managers or families. Investors are interested in taking advantage of the management expertise of particular fund managers to duplicate specific historical performances.
4.
Which of the following is true regarding the relationship between passive and active asset allocation?
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Active allocation is generally more expensive. Active allocation can be considerably more expensive because each reallocation can result in the liquidation of shares of one or more securities in exchange for shares of new securities.
5.
The primary advantage of the single-fund approach to asset allocation is ________.
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Cost. There are only a few costs involved.