Which of the following is not an advantage of mutual funds?

a. They offer a variety of investment styles. They treat income as "passed through" to the investor for tax purposes.

b. They offer small investors the benefits of diversification.

c. All of the options are advantages of mutual funds.

d. None of the options is an advantage of mutual funds.

Question

Business

Hanna Ramirez

4 June, 15:58

Which of the following is not an advantage of mutual funds?

a. They offer a variety of investment styles. They treat income as "passed through" to the investor for tax purposes.

b. They offer small investors the benefits of diversification.

c. All of the options are advantages of mutual funds.

d. None of the options is an advantage of mutual funds.

+2

Answers (2)

Know the Answer?

Dylan Murphy · Answer 1

They treat income as "passed through" to the investor for tax purposes.

Explanation:

A mutual fund is an investment where funds are pooled from various investors and used to purchase securities. Investor can be retail or institutions.

When income realised from mutual funds is passed through for tax purposes, investors are unable to manage taxes.

Katie Andrade · Answer 2

The correct answer is letter "B": They treat income as "passed through" to the investor for tax purposes.

Explanation:

A mutual fund is a pool of assets that allow investors to diversify their portfolios, thus, reduce the risk inherent. Mutual funds are usually managed by professionals which also increases the chances of making a profit. Small investors can access to mutual funds but must consider the fees that should be paid to keep their investments.

In front of revenue, just like with any other investment, mutual funds are taxed out of the investors' pockets. They are not pass-through assets such as mortgage-backed securities (MBS).