Traditionally, Value Investing Based Mutual Fund (VBMF), a stock-based

Question

Traditionally, Value Investing Based Mutual Fund (VBMF), a stock-based mutual fund, has been considered a safe haven of stock investing. However, this perception has been shattered last year since VBMF has lost as much as 24% of its capitalization. Therefore, investors need to reassess their decision parameters since, clearly, by investing in VBMF, one can lose at least as much money as one can lose by investing in any other mutual fund.

Which of the following statements most seriously weakens the author’s argument?

A. While most Mutual funds have lost money, some more than 30%, hedge funds have been extremely profitable last year.
B. The stock market has declined by 30% over the last year.
C. Most stock based mutual funds have lost more than 25% last year.
D. People who have invested in gold instead of in mutual funds have lost only 10% since the value of gold has depreciated much.
E. VBMFs provide the additional advantage of dividend payouts that other mutual funds do not provide.

MartyMurray · Accepted Answer

(E) weakens the argument, by showing that there is an additional factor, dividend payouts, that may offset some of the losses of VBMF and thus cause returns to investors from VBMF to be better than those from other funds.

At the same time, (C) also weakens the argument, by indicating that, while VBMF may have declined in value last year, it did not decline in value as much as most other funds, and thus (C) casts doubt on the idea that "by investing in VBMF, one can lose at least as much money as one can lose by investing in any other mutual fund."

So, this question is a busted question with two correct answers.

rosalynd · Answer

The author is saying that people used to think that investing in VBMFs was a safe way to invest in the stock market. However, last year VBMFs lost 24% of their value, so the author thinks that people should reconsider whether it's a good idea to invest in VBMFs.

Option E weakens the argument because it says that VBMFs offer something that other mutual funds don't - dividend payouts. This means that even though VBMFs lost some of their value, investors can still earn money from dividends, which makes it a better option than other mutual funds.

The other options don't weaken the argument as much because they talk about how other mutual funds or markets are doing, but they don't provide a reason why VBMFs might still be a good investment. For example, just because other mutual funds lost more money doesn't mean that VBMFs are a good investment.

xerotonine · Answer

Why is option C not correct here?

Deep32470 · Answer

raditionally, Value Investing Based Mutual Fund (VBMF), a stock-based mutual fund, has been considered a safe haven of stock investing. However, this perception has been shattered last year since VBMF has lost as much as 24% of its capitalization. Therefore, investors need to reassess their decision parameters since, clearly, by investing in VBMF, one can lose at least as much money as one can lose by investing in any other mutual fund.

Which of the following statements most seriously weakens the author’s argument?

A. While most Mutual funds have lost money, some more than 30%, hedge funds have been extremely profitable last year.
B. The stock market has declined by 30% over the last year.
C. Most stock based mutual funds have lost more than 25% last year.
D. People who have invested in gold instead of in mutual funds have lost only 10% since the value of gold has depreciated much.
E. VBMFs provide the additional advantage of dividend payouts that other mutual funds do not provide.

The bone of contention is between options B & E. B weakens the argument in that that since stock market has decliend by 30% hence in the flow of that vbmf has also declined. However option E clearly states that even after 24% decline the investors can reduce this decline by getting annual dividends which other stock options do not provide. Hence E most seriously weakens the conclusion

Vijay.Singh · Answer

The doubt is in the choices C and E. C compared to E weakens the argument much more

singh760 · Answer

Bunuel  could u please provide clarification as to why E is the answer and not C?

DmitryFarber · Answer

Yeah, this question needs work. In general, we should never have to play the game of "this choice weakens more." On a weaken question, one answer should weaken and the rest should really not weaken at all.

devendra.c · Answer

I believe C isn't the answer because of the following reasons: - The question stem ends with "...by investing in VBMF, one can lose at least as much money as one can lose by investing in any other mutual fund" The comparison is between VBMF (a stock based fund) and 'any other mutual fund' (including stock based funds, debt insturment based funds, and so on) - Option C talks only about stock based mutual funds. But that's not all we are comparing to. And hence, it isn't sufficient to weaken the arguement because the scope of arguement is broader than what C talks about. Please add to/correct my reasoning if required.

thr3at · Answer

Sir I believe E is right.

Explanation: 
The argument say VBMF are stock based mutual funds and it is being compared to other mutual funds (MF) (Not mentioned only stock based so assumming all forms of the MF)

C says it performed better than other forms Stock based MF (this leaves other forms of MF like commodity, Bonds, etc..)
 But E does not leaves this options out it direcctly attacks every form of MF.

Plesae correct me if I am wrong

DmitryFarber · Answer

devendra.c   thr3at

I'll reassert that it's wise not to try to learn from questions like this. It's not good for your score. I'm just jumping in now to comment on the reasoning above. We don't want to play the game of "this weakens more things or more fully." That isn't how CR is supposed to work. If a statement makes the conclusion less likely to follow from the premises, then it weakens, regardless of whether it covers the full scope of the argument. If anything, one could say that E is a *less* effective weaken than C, since it doesn't allow us to compare the overall loss from this mutual fund to the loss we might incur from others. But again, either the answer weakens or it doesn't.

In this case, it's worth noting that the narrowness of C in no way limits its effectiveness as a weakener. If the author asserts that something is the most/least, and some other item turns out to exceed it, then the conclusion is false. C tells us that some stocks have lost more than 25%, so it's clearly NOT true that VBMF has lost as much as any other. C literally disproves the argument. Sure, there could be other factors--other than the dividends mentioned in E, there could be differences in tax liability, fees, etc., but the key idea is still that we only need one exception to disprove a generalization. Similarly, if I say that I'm the tallest person in the world, and my neighbor is taller, then I'm wrong. We don't need to compare me to everyone else around the world. If one person is taller, I'm not the tallest. If one fund has greater losses, then this one doesn't involve "as least as much" loss as any other.

But really, put this one to bed. Real CR questions have one answer, and are more clearly written, and there are enough real CR questions out there to last you through test day.

imzzy · Answer

Most stock based mutual funds lost more than 25%. Now this most cannot include VBMF because VBMF has lost less than equal to 24%. Therefore, VBMF performed better than most other stock based Mutual Funds.

Option C is a clear solid weakener.

Option C is a clear solid weakener.

glagad · Answer

Counter Point for Option C - 
What if there is that one stock (Which is not most of the stocks mentioned), whose loss is less than 24%, then the conclusion holds true, since the conclusion talks about  any other stock

Counterpoint for Option E - 
What if despite the additional dividend provided by VBMF, its losses surpass those of other stocks, this option doesn't weaken the conclusion then.

I chose Option C as it tries to connect the missing link in the logic of the author (i.e. comparison between the loss of VBMF and that of other mutual funds) to confidently say that 24% is a significant number to cast doubts on the VBMF itself.

However, as multiple folks have pointed out, Option C & E both seem to be accurate, whilst having some flaws.

Traditionally, Value Investing Based Mutual Fund (VBMF), a stock-based

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Traditionally, Value Investing Based Mutual Fund (VBMF), a stock-based

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