Question

All of the following are the benefits of using the services of an investment company except:

A) professional management
B) diversification
C) ease in selling shares
D) insurance protection against loss of principal

Answer 1

Answer: D) insurance protection against loss of principal.

The term "principal" refers to the original amount of an investment. While everyone hopes to increase the amount of money they have invested, the loss of principal is an inherent risk of investing. An investment company cannot provide insurance against it. However, they do provide professional advice, allow you to diversify and make the process of selling shares easily.

Answer 2

The correct answer is D.

The investment company helps its customer to perform the agreement with the other party.

But it does not provide protection if for example the borrowing party does not pay back the amount of a loan. Then the lender simply loses the money.