Subject: Mutual Funds

1. Why do you think mutual funds are such popular investment vehicles?

I think mutual funds are such popular investment vehicles because they help people save for major milestones such as buying a home, education, retirement, emergency situations, as well as other financial goals. When buying a mutual fund, the money you spend on the fund is combined with the money of investors allowing you to buy part of the investment. Mutual bonds are also attractive to shareholders because they provide more diversification vs other forms of investment vehicles such as an individual stock.

2. Why doesnt management simply diversify its operations?

Management might not simply diversify because of its high unpredictability. Diversifying can bring major rewards to a business but it can also be extremely risky. Because of the uncertainty when it comes to diversifying, management may be hesitant to make the decision to diversify the company.

3. Isnt that what management is supposed to do?

I don't necessarily believe diversifying is what management is supposed to do. If diversifying in a certain situation will be potentially damaging to business then I do not think it would be a wise choice for management to make. I think diversifying depends on the situation that the company is in and what benefits it will bring but not something they are automatically supposed to do.

Required:

1. Why do you think mutual funds are such popular investment vehicles? Write 100 words.

2. Why doesnt management simply diversify its operations? Write 50 words.

3. Isnt that what management is supposed to do? Write 50 words.

Please write in your own words and write appropriate answers. Thank you!