Investment Company and Variable Contracts Products Representative (Series 6)Practice Exam

What periods must be covered in mutual fund performance advertising?

1. One year

2. Three years

3. Five years

4. Ten years

The correct answer is: Three years

When it comes to mutual fund performance advertising, the requirement is to provide performance data for the last one, three, and five years, but the three-year period is specifically emphasized. This is important because it offers a balanced view of the fund's performance over a more extended timeline while still being recent enough to be relevant to potential investors. Including a three-year performance period helps investors assess the mutual fund's consistency and risk over time, allowing them to make a more informed decision based on medium-term performance rather than focusing solely on short-term gains or losses. While performance for other periods may also be included, the three-year benchmark provides a critical reference point that regulatory guidelines prioritize to aid transparency and comparability in fund performance advertising.