Question : Statement 1: Mutual funds pool funds from various investors to invest in a diversified portfolio.
Statement 2: Mutual funds only invest in a single type of financial instrument.
Option 1: Statement 1 is true, and statement 2 is true.
Option 2: Statement 1 is true, but statement 2 is false.
Option 3: Statement 1 is false, and statement 2 is true.
Option 4: Statement 1 is false, and statement 2 is false.
Correct Answer:
Statement 1 is true, but statement 2 is false.
Solution : The correct answer is (b) Statement 1 is true, but statement 2 is false.
Statement 1 is true. Mutual funds aggregate money from multiple investors and use these funds to invest in a diversified portfolio of stocks, bonds, or other financial instruments. The diversification helps spread risk and potentially enhance returns.
Statement 2 is false. Mutual funds are designed to invest in a variety of financial instruments, which can include stocks, bonds, money market instruments, real estate investment trusts (REITs), and more. Diversification across different types of instruments is a fundamental aspect of mutual funds to achieve their investment objectives.
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