Multiple choice

Which of the following is not an advantage of mutual fund investment over direct investment?

  1. Higher liquidity

  2. Lower transaction costs

  3. Greater convenience

  4. Guaranteed returns
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Mutual funds offer several advantages including higher liquidity (easy to enter/exit via NAV), lower transaction costs (due to economies of scale), and greater convenience (professional management, automatic reinvestment). However, mutual funds do NOT guarantee returns - their performance depends on market movements and the fund manager's skill. The question asks which is NOT an advantage, so Option D is the correct answer because guaranteed returns are not a feature of mutual funds.

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