Advanced Diploma of Financial Planning (ADFP) Practice Test

What is one way investors can purchase mutual funds?

1. Exclusively from private equity firms

2. Through brokers, banks, or financial institutions

3. Only through online platforms

4. Only directly from the stock exchange

The correct answer is: Through brokers, banks, or financial institutions

Investors can purchase mutual funds through brokers, banks, or financial institutions because these entities provide access to a variety of mutual fund options. This method is beneficial for investors as it allows them to leverage the expertise and resources of financial professionals who can help them choose funds that align with their financial goals and risk tolerance. Brokers can offer a wide array of mutual funds from different fund families, assisting investors in diversifying their portfolios. Furthermore, banks and financial institutions often have their own mutual fund offerings and can help streamline the purchasing process for clients. The other options are limited in scope or specificity. Exclusive purchases through private equity firms do not encompass the range of mutual funds widely available to the public. While online platforms are indeed a popular method for purchasing mutual funds, it is not the only way, as investors can still work with traditional financial intermediaries. Additionally, mutual funds cannot be purchased directly from the stock exchange; they are offered through the mutual fund companies themselves or through third-party intermediaries rather than being traded like stocks. This distinction makes the option of purchasing through brokers, banks, or financial institutions the most comprehensive and accurate choice.