Choose wisely. There is only one correct answer to each question.
0%
Keep studying!
Review your answers below to learn more.
1.
Because index funds are passively managed, we can expect their annual expenses to be very low.
False. Though we should expect that, we unfortunately cannot, as some funds still charge high annual expenses.
2.
Which type of index fund is generally the least tax friendly?
Small-company index fund. Small-cap index funds reap big taxable gains when companies grow too large for the index, forcing the fund to sell those stocks. Large-cap and SP 500 index funds sell stocks when they fall out of the index, meaning they only sell small positions.
3.
If you see the letters MSCI in an index, you know you are dealing with what category of stocks?
International. The various MSCI indexes track international stocks.
4.
Which statement is true?
Index funds in the large-cap blend category can follow different indexes. Not all index funds are cheap--not even all large-blend index funds. Index funds in the large-blend category can follow different indexes--the most common of which is the SP 500.
5.
Which of the following types of index funds is usually most tax efficient?
Large-cap index fund. When large-cap funds need to sell stocks that become too small for their indexes, they do create taxable capital gains, but those gains are usually quite small.
