What is Mutual Fund?
These days everyone talks about investments and mostly Mutual Fund investments, but what is a Mutual fund investment.
These are collection and accumulation of numerous different kinds of shares. It is when investor together wish to acquire securities as a group, this fund can be called a mutual fund. Every single investor of this group has a symmetrical stake in the shares based on the total amount.
Mutual Funds are great Investment Options
As we all knew that Mutual Funds are great investment options for small investors who can’t actively manage their portfolio for risk management. But still one must need to know basic information about Mutual funds before buying Mutual Funds units. As there are so many mutual funds schemes, it is very important for you to choose those schemes which is similar to your risk taking capacity.
For example , an adult with lots of liabilities should avoid risky Mutual fund schemes with most equity exposure. If you have read our article on Ultimate guide to Mutual funds then you can solve this quiz to verify your knowledge.
Mutual funds is an easy way to have several shares. It can be an inexpensive alternative and an easy way for a common man to have many shares. The origin of mutual fund was around 80 years ago in Boston. This day all over the world there are thousands of mutual funds and lot of individuals are investing in it.
Mutual Fund Quiz
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#1. Which of the following Funds are safest?
Fund Manager will invest your money in such a way that you got your invested returns in less than 91 days in Liquid Funds.
So safest fund is Liquid fund.
While sector funds only focus on particular sector and thematic funds only focus on one theme so they are relatively risky.
#2. What is Fund of Fund scheme in Mutual Funds?
As name suggests , Fund of Fund schemes only invest in other schemes of same Mutual Fund company.
#3. Mutual fund units are
All Mutual fund are exempt for wealth tax, no exceptions.
#4. Movement in security prices are governed by SEBI
SEBI have no control in movement in security prices. As SEBI has no control on demand and supply so automatically have no control in fluctuations in shares.
#5. Rematerialization is a process by which
While in case of De materialization
units in physical form are converted into electronic form.
#6. ELSS fund has
Exchange traded funds have no lock-in period as they are traded in exchange.
#7. A Mutual Fund Trust is
Mutual Fund is a Trust not a company. And AMC is managing investor’s money not their own. So they are exempt from tax.
#8. Stamp duty will be imposed on the transfer of mutual fund units.
From 1st July 2020,
Stamp duty will be imposed on the transfer of mutual fund units.
Stamp duty will be imposed on Transfer of units from one demat account to another at the rate of 0.015%.
#9. In (SIP) Systematic Investment Plan,
As shares are fluctuating throughout the period, the NAV is also changing.
To tackle this, SIP offers benefit of Rupee cost averaging.
It provides average cost of varied NAV throughout the period.
#10. Which of the following is not used to Measure Risk in Mutual funds ?
Treynor ratio is a way to examine the performance of any investment by adjusting for it’s risk
#11. Which of the following is used to Measure Risk in Mutual funds ?
Beta is a risk measure in Mutual funds. While rest of the options are Risk Adjusted returns.
#12. Mutual fund can be hold in
#13. Which of the following Are Two Types Of Investing Approaches?
#14. Which of the following Mutual funds are not actively managed ?
Index funds are example of passive funds where Fund Managers almost copies indices
#15. Which of the following is a Debt Fund?
Gilt fund is an Debt Fund Invest which in government securities.
#16. Which of the following is not a Equity Fund?
Credit opportunities fund is not a Equity Fund. It is a debt fund which invest in low rated corporate bond
#17. In Close ended schemes liquidity is very high
Close ended schemes have fixed time frame, one can’t buy units after NFO. So, liquidity is not high as compare to Open ended schemes.
#18. Why hybrid fund invest in debt?
hybrid funds invest majority of their asset in equity funds rest of the asset into debt to reduce risk.
#19. Treynor ratio consider both systematic and unsystematic risk
Treynor didn’t consider unsystematic risk while Sharpe ratio also consider unsystematic as well as Systematic risk.
#20. SEBI regulates banks
SEBI regulates Stock market while RBI regulates banks in India.
#21. In Top down approach one need to first analyze industry
In Top down approach one need to first analyze economy then industry and lastly company
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Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please read the Risk Disclosure documents carefully before investing in Equity Shares, Derivatives, Mutual fund, and/or other instruments traded on the Stock Exchanges.
As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives shall be achieved. Past performance of securities/instruments is not indicative of their future performance. This post is only for Educational purpose.