Advertisement: Last year, Factorial Mutual Fund continued its strong record of investment performance. Investors who included Factorial Fund in their portfolios realized an average capital gain of 15% across all of their investment assets, nearly double the market return. Therefore, investors interested in high returns should consider adding Factorial Mutual Fund to their portfolios.
The claim in the advertisement above is based on which of the following assumptions?
(A) Factorial Fund is one of the oldest and largest mutual funds in the investment industry.
(B) A substantial part of the 15% portfolio appreciation was attributable to the returns of Factorial Fund and this level of fund’s performance is likely to persist in the future.
(C) Last year, Factorial Fund outperformed all other funds with similar style and investment objectives.
(D) The Fund is suitable to all investors.
(E) The fees charged by Factorial Fund are among the lowest in the investment industry.
It seems you understand that (B) is the strongest answer, but you want to know what is wrong with (D).
First of all, I will say: you are missing the forest for the trees. You are getting so caught on picayune details that you are missing the big picture. This tells me you have too much
experience with GMAT CR arguments and not enough
experience with real-world arguments. It appears you have hit a point of diminishing returns with GMAT CR questions, at which the study of them can do as much harm as good. You really need to balance your perspective by getting an excellent grounding in real world economic arguments. Read the WSJ, the NYT, and the Economist
magazine. Read about the real push-and-pull in the world. That will give you the broader perspective you are missing right now.
In this problem --- the broader perspective is: this guy wants to sell me this mutual fund. His evidence --- "Investors who included Factorial Fund in their portfolios realized an average capital gain of 15% across all of their investment assets
" ---- wait a moment! Huge logical leap! If those folks had several stocks & bonds & funds in their portfolio besides Factorial Fund, why on earth would we attribute the success of the portfolio overall to the presence of Factorial Fund. If I own, say, $200 in Factorial Fund and $5000 in Apple, and the Apple goes through the roof, yes, I make a big profit, but what does that profit have to do with the little bit of Factorial Fund I had? That is the huge gaping hole in this argument. That is precisely the hole that needs to be addressed. That's why (B) is the clear choice for the correct answer.
As for (D), check your own assumptions and careful reading. The argument does not say: "investors interested in high returns should add
Factorial Mutual Fund to their portfolios." (That would be way to strong for the CR section.) Rather, it says: "investors interested in high returns should consider adding Factorial Mutual Fund to their portfolios
." Presumably, a big part of what each investor should consider is whether Factorial Fund is suitable to her own portfolio. Therefore, automatic suitability is not an assumption. ----------- Suppose (D) is not correct: suppose Factorial Fund is suitable, say, for 98% of investors, but not that last 2%. How much do you know about real-world advertising? Well, any ad that appeals to 98% of the population is an unbelievably successful ad, successful beyond all reasonable expectations! If Factorial Fund is really as good as the Advertisement claims --- that is to say, if assumption (B) is really true --- then indeed every investor should
consider it, simply because it's so good, and only those investors who find it is not suitable for their portfolios should choose not to include it --- in other words, finding out it's not suitable would be the one and only one reason not to include it. Those are all interpretations by which (D) can be false and the argument can still retain its full strength. (D) is in no way an assumption upon which the strength of the argument depends.
Does all this make sense?
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