Alex is a working professional and has managed to save a small amount of money from his earnings. he wants to invest in something that is customized to his risk appetite. which financial institution should he choose? a. hedge funds b. mutual funds c. life insurance companies d. credit unions e. pension funds
Since the question doesn’t mention the level of risk that Alex would be able to stomach, it can be assumed that the financial institution that can satisfy Alex’s risk appetite would be (B) mutual funds.
Mutual funds are investment programs where clients can hold portfolio with diverse instruments, and thus the risks are much more diversified than other types of investments. Thus if Alex would rather have a mixture of high-risk, medium-risk, and low-risk products, a mutual fund firm would be better equipped to handle his needs.
I honestly got B. Mutual Funds
The correct option is B.
Mutual Fund is the sum of contributions in money delivered by natural and legal persons to a corporation or administrator, so that it invests in different types of financial instruments that are public offering values or even goods, with the aim of achieving a profit, which is then shared among all who made a contribution.
Unlike savings, the amounts invested in mutual funds do not have a guaranteed profit, since mutual funds run the risk that the investments made do not deliver the expected return. Therefore, the profit may be less than expected or you may even lose part or all of the money invested.