Question of the Week

Which of the following statements regarding the performance of a mutual fund would be permitted under current rules?

A) Income and safety-oriented investors need look no further than the Muscat GNMA fund. Since the only investments held by the fund are GNMA certificates and short-term T-Bills, the fund is government-guaranteed for safety.
B) If an investor made a one-time deposit of $10,000 in the LIB Aggressive growth fund 5 years ago, and reinvested all dividends and gains, the total value today would be $26,230.75.
C) The Fantastic Growth Fund has been paying regular dividends and capital gains for the past 6 years. Those who invest now may look forward to continued distributions from the fund in the future.
D) The XY Fund has been producing an average of a 15% total return for the past five years. If a person invested $10,000 today, in five years the total value of the investment would be approximately $21,000.


The correct answer is B)

A mutual fund may only use past performance in illustrations or presentations. Representations regarding future performance based on the fund’s past performance are prohibited.

Professionals FAQs
  1. Where can I look for a financial planner?

    References from trusted friends or family members can help you find a financial planner; however, keep in mind that your friends' financial situations and goals may differ from yours and, therefore, their planners won't necessarily be the best fit for you.The Certified Financial Planner (CFP) Board of Standards certifies financial planners and maintains an online list of certified financial planners on its CFP Board of Standards website.
  2. If I am looking to get an Investment Banking job. What education do employers prefer? MBA or CFA?

    If you are looking specifically for an investment banking position, an MBA may be marginally preferable over the CFA. The caveat here is that the MBA would most probably need to be from a Top-20 B-School.The Chartered Financial Analyst (CFA) is well worth considering if you (a) are aiming for an entry-level position in investment banking, and/or (b) cannot afford to shell out six figures for an MBA or have to settle for a lesser-known B-school.That's because in the investment banking field, most entry-level positions are at the analyst level.
  3. Can I still pass the CFA Level I if I do poorly in the ethics section?

    You may still pass the Chartered Financial Analysis (CFA) Level I even if you fare poorly in the ethics section, but don't count on it. The CFA Institute has long emphasized that ethics is a particular area of focus for it. The seriousness with which the CFA Institute views ethics is evident from the fact that for exam candidates with borderline total scores, performance on the ethics section can mean the difference between passing and failing the exam.
  4. Under the USA, registration as an IAR includes all of the following EXCEPT:

    Under the USA, registration as an IAR includes all of the following EXCEPT: A. Minimum net capitalB. Passing a qualification examC. Filing a consent to service of processD. Posting a surety bond The correct answer is "A", since only an IA would need to prove minimum net capital requirements.