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Funds 303: Choosing an Index Fund

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1.
Index funds can have high annual expenses.
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True. Despite not needing much management, some index funds still charge high annual expenses.
2.
Which of the following types of index funds is usually most tax efficient?
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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.
3.
If you see the letters MSCI in an index, you know you are dealing with what category of stocks?
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International. The various MSCI indexes track international stocks.
4.
Which statement is false?
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Index funds are all cheap. Given that index-fund managers aren't actively researching and selecting stocks, all index funds ought to be cheap.
5.
The Russell 2000 index tracks the 2000 largest American stocks.
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False. The Russell 2000 actually tracks the 1,001st to 3,000th largest U.S. stocks--in other words, the bottom 2,000 stocks in the Russell 3000 index.