Question

If a securities salesperson encourages a customer to invest $20,000 in Class A shares in each of 3 different families of mutual funds, which of the following is most likely to occur?

A)More predictable income
B)Improved diversification
C)Breakpoint sale violation
D)Reduced expense

Answer 1

Encouraging the customer to invest $20,000 in Class A shares in each of 3 different families of mutual funds would most likely result in improved diversification, reducing the risk of loss.

Step-by-step explanation:

By encouraging the customer to invest $20,000 in Class A shares in each of 3 different families of mutual funds, the most likely outcome would be improved diversification (option B). Diversification is the practice of buying stocks or bonds from a wide range of companies in order to reduce risk. By investing in multiple mutual funds, the customer would have exposure to different sectors and companies, reducing the impact of any single investment on their overall portfolio. This provides a greater opportunity for potential returns while also minimizing the risk of loss.