Advanced Diploma of Financial Planning (ADFP) Practice Test

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Which of the following statements regarding mutual funds is correct?

Mutual funds can only be purchased directly from a fund company
Mutual funds are available exclusively through sales agents
Mutual funds may be affiliated with an underwriter
All mutual funds are short-term investments

The correct answer is: Mutual funds may be affiliated with an underwriter

The statement that mutual funds may be affiliated with an underwriter is correct because many mutual funds work in conjunction with underwriters to facilitate the buying and selling of their shares. An underwriter can help in the distribution of a mutual fund's shares to investors and assist in determining the price at which the funds will be offered. This relationship can enhance accessibility and support for investors looking to invest in mutual funds. Mutual funds can be purchased from various sources, including directly from the fund company or through sales agents, which makes the first two statements incorrect. Additionally, mutual funds are designed for various investment horizons; many are focused on long-term growth rather than limited to short-term investments. Thus, the final statement is also incorrect.