alleryStart learning →Why does a mutual fund's diversification help an investor?
AIt guarantees a fixed annual return
BIt eliminates every market movement
CIt lets the investor escape all taxes
DIt lowers risk by holding many assets
Answer & Solution
Correct answer: D. It lowers risk by holding many assets
Spreading money over many securities means a loss in any single holding has a limited effect on the whole.
Keep practising Mutual Funds
Browse all Mutual Funds questions for CA Final, or explore more Strategicfinancialmanagement topics.
Related questions
What risk can arise when an ETF tracks assets using futures and swaps?Replication in an index ETF means doing what?An ETF arbitrage mechanism keeps which two values close?Who creates and redeems ETF shares directly with the issuer in large blocks?How does an ETF share differ from an open-end mutual fund unit?What is mismarking in securities valuation?How often are a fund's investments valued for NAV?How many units does a $50,000 investment buy in a no-load fund at NAV of $25?