Question

Which of the following makes it possible for even a small investor to hold a diverse set of stocks and still keep the cost of purchasing additional stock holdings low?

1) Mutual funds
2) Index funds
3) Exchange-traded funds
4) All of the above

Answer 1

All of the above make it possible for even a small investor to hold a diverse set of stocks and still keep the cost of purchasing additional stock holdings low.

Step-by-step explanation:

All of the above make it possible for even a small investor to hold a diverse set of stocks and still keep the cost of purchasing additional stock holdings low. Mutual funds are investment vehicles that allow investors to pool their money together to invest in a diversified portfolio of stocks, bonds, or other assets. This allows small investors to access a wide range of investments that would typically be expensive to purchase individually. Index funds are a type of mutual fund that aim to replicate the performance of a specific market index, such as the S&P 500. These funds offer instant diversification and low costs, as they only need to replicate the index's holdings rather than actively manage a portfolio. Exchange-traded funds (ETFs) are similar to index funds, but they are traded on an exchange like individual stocks. ETFs offer the advantage of being highly liquid and can be bought and sold throughout the day at market prices. By investing in mutual funds, index funds, or ETFs, small investors can achieve diversification and keep costs low by spreading their investments across a portfolio of stocks or other assets.