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1.
The main drawback to most funds of funds is _______.
Hidden costs. Funds of funds usually offer access to lots of other funds for a low minimum; they also limit paperwork. But a fund of funds can have high hidden costs, charging shareholders expenses on top of the expenses of the funds it owns.
2.
Why are index funds generally predictable?
Both of the above. Their returns and their makeup are based upon the underlying index, and this makes them move in line with the underlying index.
3.
Which is not an advantage of indexing?
Great stock-picking. Index funds are generally low-cost and predictable. Index-fund managers don't pick stocks in the traditional sense, though.
4.
An index-fund manager _______.
Buys what an index does. Index-fund managers are passive investors: They buy what an index does. What they like or don't like doesn't factor into what gets bought or sold.
5.
Funds of funds directly buy _______.
Other mutual funds. A fund of funds literally owns other mutual funds. Those funds may own stocks, bonds, or both.
