Which of the following best describes an investment in mutual funds?

Which of the following best describes an investment in mutual funds?

• A. Direct investment
• B. Indirect investment
• C. Government investment
• D. Private equity investment

Answer: (B)

An investment in mutual funds is best described as an indirect investment. When investors buy shares or units in a mutual fund, they are not directly purchasing the underlying securities (such as stocks or bonds) that the fund holds. Instead, they are pooling their money with other investors to create a larger fund, which is then managed by a professional portfolio manager. This manager makes decisions about the buying and selling of the underlying securities on behalf of all the investors in the fund. By choosing indirect investment, investors benefit from professional management, diversification, and the ability to invest in a broad range of securities that they might not be able to access independently. This structure provides a convenient way for individuals to gain exposure to a variety of asset classes without having to manage the investments themselves.

An investment in mutual funds is best described as an indirect investment. When investors buy shares or units in a mutual fund, they are not directly purchasing the underlying securities (such as stocks or bonds) that the fund holds. Instead, they are pooling their money with other investors to create a larger fund, which is then managed by a professional portfolio manager. This manager makes decisions about the buying and selling of the underlying securities on behalf of all the investors in the fund.

By choosing indirect investment, investors benefit from professional management, diversification, and the ability to invest in a broad range of securities that they might not be able to access independently. This structure provides a convenient way for individuals to gain exposure to a variety of asset classes without having to manage the investments themselves.