Investment Company and Variable Contracts Products Representative (Series 6)Practice Exam

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Which of the following is NOT a characteristic of a mutual fund?

Open-ended structure
Liquidity
Fixed capital
Professional management

The correct answer is: Fixed capital

The concept of fixed capital is not characteristic of a mutual fund because mutual funds are typically open-ended, allowing for the continuous issuance and redemption of shares. This means that the total capital of the fund can change frequently as investors buy or sell shares. In contrast, fixed capital implies a constant amount of capital that does not change over time. Mutual funds are designed to be flexible for investors, with an open-ended structure allowing new investments and redemptions at any time. Additionally, they provide liquidity, as investors can redeem their shares for cash on any business day based on the fund’s net asset value. The professional management of mutual funds is another key characteristic, where a team of experienced managers makes investment decisions based on research and market trends to optimize returns for shareholders. Collectively, these aspects reinforce how mutual funds operate and adapt to investor demand and market conditions.