Practice Quiz

FINRA Series 6

Category - Series 6

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Marshall’s employer offers a 403(b) plan, and Marshall must decide into which of several mutual fund alternatives the contributions will be invested. Regardless of other factors, which of the following would clearly not be a good choice?
  1. a municipal bond fund
  2. a fund that invests in stocks that are expected to experience high growth
  3. a fund that invests almost exclusively in high-tech stocks
  4. a fund that invests in both foreign and domestic stocks
Explanation
Answer: A - A municipal bond fund is clearly not a good investment choice for a 403(b) plan. Earnings in a 403(b) plan grow tax-deferred, so Marshall would not be receiving the tax-free income benefits offered by a municipal bond fund. All he would be receiving is a lower return on his investment.
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