How do mutual funds reduce risk for the average individual investor? a.Mutual funds reduce risk through...

How do mutual funds reduce risk for the average individual investor?

a.Mutual funds reduce risk through portfolio diversification.

b.Each mutual fund guarantees a specific return on investment.

c.Mutual funds provide ratings for lenders intended to assess risk of default.

d.Through increasing an investor\'s return on investment, which reduces the risk an investor would have to bear.

e.By being more liquid than traditional stocks, mutual funds reduce risk.

Expert Solution

A is Correct, Mutual Fund Houses reduce risk by portfolio diversification by constantly tracking individual stock in a portfolio and actively adding new performing stocks and exiting the underperforming stocks.

Rahul Sunny answered 2 years ago

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