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Finra Series-6 Exam - Topic 2 Question 118 Discussion

Your client, Mr. Whiff, knows nothing about investment companies, and you are educating him about the advantages of investing through one, rather than investing in individual stocks and bonds.Which of the following statements could get you in trouble?
B) ''Investing through an investment company will result in a lower tax bill than had you invested in individual stocks and bonds.''
A) ''In investing through an investment company you will be able to invest a small amount of money and achieve greater diversification than you could otherwise.''
C) ''An investment in an investment company gives you an undivided interest in the company, in proportion to the number of shares you own.''
D) ''By investing your money through an investment company, you are getting the benefit of professional management.'

Finra Series-6 Exam - Topic 2 Question 118 Discussion

Actual exam question for Finra's Series-6 exam
Question #: 118
Topic #: 2
[All Series-6 Questions]

Your client, Mr. Whiff, knows nothing about investment companies, and you are educating him about the advantages of investing through one, rather than investing in individual stocks and bonds.

Which of the following statements could get you in trouble?

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Suggested Answer: B

The statement that could get you in trouble is, ''Investing through an investment company will result in a lower tax bill than had you invested in individual stocks and bonds.'' Improved tax planning is not a benefit of investing through an investment company since the fund's manager cannot make investment decisions based on the tax status of each of the fund's shareholders. An investor who actively manages his own portfolio is better able to lower his tax bill.


by Eric at Jun 21, 2026, 04:11 PM

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Fatima
5 hours ago
D makes sense since professional management is a big selling point, but I wonder if there are exceptions.
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Edward
5 days ago
C sounds correct to me, but I vaguely recall something about how ownership works in these companies.
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Roosevelt
11 days ago
I’m not sure about B. I think there are tax implications with investment companies that could be misleading.
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Shasta
16 days ago
I remember we discussed how diversification is a key advantage of investment companies, so A seems safe.
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