Investment Jobs Mutual Fund Investment 4

Question 1

What is a target-date fund designed for?

Accepted Answer

Automatically shifting asset allocation to become more conservative as a goal date nears

Answer

Target-date funds gradually rebalance toward conservative assets as the retirement date approaches.

Question 2

What is a capital gains distribution from a mutual fund?

Accepted Answer

A payout of profits from securities the fund sold

Answer

Capital gains distributions pass along profits the fund realized from selling holdings.

Question 3

A sector fund concentrates its investments in what?

Accepted Answer

A single industry or sector of the economy

Answer

Sector funds focus on one industry, such as technology or healthcare, increasing concentration risk.

Question 4

What is dollar-cost averaging when investing in mutual funds?

Accepted Answer

Investing a fixed amount at regular intervals regardless of price

Answer

Dollar-cost averaging invests a set amount regularly, buying more shares when prices are low.

Question 5

What is the role of a fund's custodian?

Accepted Answer

To safeguard the fund's assets and securities

Answer

The custodian, typically a bank, holds and protects the fund's assets for safekeeping.

Investment Practice Test