The Impact of Limited Investor Control in Mutual Funds

B

The correct answer is B, "Lack of control."

Mutual funds are investment vehicles that pool money from a large number of investors to purchase a diversified portfolio of securities. Mutual funds are managed by professional fund managers who make investment decisions on behalf of the investors.

Investors in mutual funds generally do not have direct control over the investment decisions made by the fund manager. The fund manager is responsible for selecting the securities to be held in the portfolio, and the investors do not have a say in which securities are purchased or sold or the timing of those trades.

Additionally, investors typically cannot ascertain the exact makeup of a fund's portfolio at any given time. Mutual funds are required to disclose their holdings periodically, usually on a quarterly basis, but these disclosures are not always up-to-date and may not provide a complete picture of the fund's holdings.

Price uncertainty and costs despite negative returns are not specific to mutual funds and can be risks associated with any investment. Price uncertainty refers to the risk that an investment's price may fluctuate, leading to potential losses for the investor. Costs despite negative returns refer to the fact that investors may still have to pay fees and expenses associated with an investment, even if it performs poorly.

In summary, the lack of control over investment decisions made by the fund manager is a defining characteristic of mutual funds, and is the reason why investors may not be able to ascertain the exact makeup of a fund's portfolio at any given time.