Canadian Securities Course (CSC) Level 2 Practice Exam

What is one of the advantages of mutual funds related to professional management?

1. Flexible and redemption options

2. Liquidity

3. Low cost professional management

4. Variety and transferability

The correct answer is: Low cost professional management

The choice highlighting low-cost professional management accurately identifies a key advantage of mutual funds. Mutual funds pool together capital from many investors, allowing them to access professional investment management services that they might not be able to afford individually. The fund managers are typically experienced professionals who actively research and trade securities to achieve the fund's investment objectives, which can lead to better investment outcomes. This professional management is cost-effective relative to what an individual investor would pay for similar services if managing a portfolio independently. By sharing these management costs among all investors in the fund, mutual funds can provide access to sophisticated investment strategies and insights while minimizing expenses per investor. The other options represent various features or benefits of mutual funds but do not specifically focus on the aspect of professional management and its associated costs.