CMFAS Collective Investment Schemes M3 3

Question 1

What is dollar-cost averaging?

Accepted Answer

Investing a fixed amount at regular intervals regardless of price

Answer

Dollar-cost averaging involves investing a fixed amount regularly, which buys more units when prices are low and fewer when prices are high, averaging the cost.

Question 2

What is a feeder fund?

Accepted Answer

A fund that invests substantially all its assets into another fund

Answer

A feeder fund channels virtually all its capital into a single master fund, which does the actual investing. This structure allows access to foreign funds.

Question 3

What is the expense ratio of a fund?

Accepted Answer

The total annual fund operating expenses expressed as a percentage of average net assets

Answer

The expense ratio includes all operating costs (management fee, trustee fee, audit fees, etc.) expressed as a percentage of the fund's average net assets.

Question 4

What is a fund-of-funds?

Accepted Answer

A fund that invests in other funds rather than directly in securities

Answer

A fund-of-funds invests in a portfolio of other investment funds rather than investing directly in stocks, bonds, or other securities.

Question 5

What is redemption in the context of unit trusts?

Accepted Answer

Selling units back to the fund manager in exchange for cash

Answer

Redemption is the process of selling your units back to the fund manager, who will pay you the redemption price (bid price) based on the current NAV.

CMFAS Practice Test

CMFAS Practice Test

CMFAS Collective Investment Schemes M3 3