Mutual Funds Explained | Everything You Need to Know

Understanding Mutual Funds

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Question

Mutual funds have -

Answers

A. sometimes maintained the stability of their correlation with the market.

B. generally maintained the stability of their correlation with the market.

C. rarely maintained the stability of their correlation with the market.

D. tended to decrease their level of diversification over time.

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Explanations

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A. B. C. D.

Mutual fund managers rarely change the makeup of reasonably well diversified portfolios substantially. Studies have also found that funds tend to remain consistent in their risk class. This consistency allows investors to maintain their diversification and desired risk class.

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