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Investment Funds Basics

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Questions and Answers

What is the primary purpose of an investment fund?

To offer a high-risk, high-reward investment strategy

To pool money from various investors to invest in a diversified portfolio (correct)

To trade on the stock market exclusively

To provide a guaranteed return on investment

What type of investment fund is characterized by a fixed portfolio of securities?

Index fund

Closed-ended fund (correct)

Mutual fund

Open-ended fund

What is the primary benefit of investing in a diversified portfolio?

Higher risk of losses

Reduced risk through spreading investments across different asset classes (correct)

Guaranteed high returns

Lower returns on investment

What is the role of a fund manager in an investment fund?

<p>To make investment decisions based on the fund's investment objectives</p> Signup and view all the answers

What is the primary difference between an open-ended fund and a closed-ended fund?

<p>Number of shares outstanding</p> Signup and view all the answers

Study Notes

Investment Funds

The primary purpose of an investment fund is to pool money from many investors to invest in a variety of assets, such as stocks, bonds, or real estate, to achieve a common financial goal.

Types of Investment Funds

A fixed portfolio of securities characterizes a unit trust, a type of investment fund.

Diversified Portfolios

The primary benefit of investing in a diversified portfolio is that it reduces risk by spreading investments across different asset classes, industries, or geographic regions, increasing the potential for long-term growth.

Fund Managers

The role of a fund manager in an investment fund is to make investment decisions on behalf of the fund's investors, aiming to achieve the fund's investment objectives.

Open-Ended vs Closed-Ended Funds

The primary difference between an open-ended fund and a closed-ended fund is that open-ended funds issue new shares or redeem existing shares based on investor demand, whereas closed-ended funds have a fixed number of shares that are traded on an exchange.

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Description

Test your knowledge of investment funds, including their primary purpose, types, benefits, and roles of fund managers. Learn about diversified portfolios and the differences between open-ended and closed-ended funds.