It is claimed that mutual funds have two advantages.The first is that mutual funds allow people with small amounts of money to diversify.The second is that mutual funds provide the skills of professional money managers who buy stocks they believe will be the most profitable and thereby increase the return that mutual fund depositors earn on their savings.
A)Economists strongly agree with both claims.
B)Economists are skeptical of both claims.
C)Economists are skeptical of the first claim,but strongly agree with the second.
D)Economists strongly agree with the first claim,but are skeptical of the second.

Question

Quizplus · Accepted Answer

Economists strongly agree with the first claim that mutual funds enable diversification, which is difficult for people with small amounts of money to achieve on their own. However, they are skeptical of the second claim that professional money managers can consistently outperform the market and generate higher returns for mutual fund depositors. Many studies have shown that most mutual fund managers underperform the market in the long run, and their higher fees can erode the returns earned by depositors.

It Is Claimed That Mutual Funds Have Two Advantages