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Questions and Answers

What is the biggest advantage of investing in mutual funds compared to traditional investments like fixed deposits?

  • Fixed annual income
  • Higher returns over the long term (correct)
  • Guaranteed safety of principal amount
  • No professional management required

According to data, how much return have equity mutual funds in India provided over the last 10 years on average?

  • 5-7% annually
  • 12-15% annually (correct)
  • 20-25% annually
  • 8-10% annually

Why is diversification important in investment, and how does mutual funds help?

<p>It minimizes risks by spreading investments across multiple assets (C)</p> Signup and view all the answers

In India, which type of mutual fund offers tax benefits under Section 80C of the Income Tax Act?

<p>Equity-Linked Savings Scheme (ELSS) (B)</p> Signup and view all the answers

What role does a financial advisor play in mutual fund investment?

<p>All of the above (D)</p> Signup and view all the answers

Flashcards

Diversification

Investing in a variety of assets, aiming to reduce risk by spreading investments across different sectors, asset classes, and geographic locations.

What is a mutual fund?

Mutual funds are a type of investment where money from multiple investors is pooled together and invested in a diversified portfolio of securities, typically stocks, bonds, or a combination of both.

Professional Management in Mutual Funds

Mutual funds managed by professional fund managers who research and select securities based on the fund's investment objective and strategy.

Benefits of Mutual Fund Diversification

Allows investors to gain exposure to a wider range of investments than they could on their own, diversifying their portfolio and potentially minimizing risk.

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Higher Returns Potential of Mutual Funds

Mutual funds aim to provide higher returns over the long term compared to traditional investments like fixed deposits, but they are also subject to market fluctuations.

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Fixed Annual Income from Mutual Funds?

When investing in mutual funds, you are not assured of a specific fixed annual income. It can fluctuate based on the fund’s performance.

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Average Return of Equity Mutual Funds in India

The average return on equity mutual funds in India over the last 10 years has been between 12-15% annually. This may not reflect all funds and is not a guarantee of future returns.

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What is ELSS?

The Equity-Linked Savings Scheme (ELSS) is a type of tax-saving mutual fund in India that allows investors to claim tax deductions under Section 80C of the Income Tax Act.

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Role of a Financial Advisor in Mutual Fund Investment

Financial advisors offer guidance on choosing mutual funds, managing your portfolio, and adjusting it based on your investment goals, risk tolerance, and market conditions.

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Capital of France (example flashcard)

Paris

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Study Notes

Mutual Funds Quiz Study Notes

  • Mutual Fund Advantages: Higher returns over the long term are the biggest advantage compared to fixed deposits.
  • Mutual Fund Returns (India): Equity mutual funds in India have averaged 12-15% annually over the past 10 years.
  • Diversification Importance: Diversification minimizes investment risks by spreading investments across different assets. Mutual funds achieve this.
  • Tax-Advantaged Mutual Funds (India): Equity-Linked Savings Schemes (ELSS) offer tax benefits under Section 80C of the Income Tax Act.
  • Financial Advisor Role: Financial advisors assist in choosing the right mutual fund based on investment goals, ensuring portfolios remain on track with market conditions and providing guidance for tax-saving investments.

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