Series 7 Exam Question 304: Answer and Explanation

Question: 304

One of your clients wants to start adding some diversity to their portfolio by investing in mutual funds. Which of the following is the most important consideration when choosing a mutual fund?

• A. Whether the fund is load or no-load
• B. Management fees
• C. Investment objectives
• D. 12b1 fees

Correct Answer: C

Explanation:

C. Certainly all the choices listed are important, but the most important one is the investment objectives of the mutual fund. In other words, you need to know whether the investor is looking for a growth fund, an income fund, a municipal bond fund, an international fund, and so on. When comparing funds with the same investment objectives, all the other things, such as comparing management fees, whether the fund is load or no-load, and so on, come into play.