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Funds 101: Mutual Fund Basics

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1.
When a mutual funds individual holdings make money, so do the mutual funds shareholders.
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True. Earnings are passed from the holdings to the funds shareholders.
2.
Which of the following pieces of information on portfolio managers is included in a mutual fund prospectus?
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Employment history. This provides a sense of the managers' experience.
3.
Diversification spreads risk among several different investments.
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True. Each investment has its own risk profile.
4.
Mutual funds will require a minimum purchase amount; however, that minimum can be waived.
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True. Some mutual funds will waive the minimum required investment amount for a number of different reasons, such as setting up an automatic investment plan with them. Refer to the fund's prospectus for additional details on such waivers.
5.
Which party hands out dividends to mutual fund investors?
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The transfer agent. If you chose "distributor," remember that this party distributes shares, not dividends.
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