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Funds 303: Choosing an Index Fund

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1.
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.
2.
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.
3.
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.
4.
Because index funds are passively managed, we can expect their annual expenses to be very low.
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False. Though we should expect that, we unfortunately cannot, as some funds still charge high annual expenses.
5.
Which statement is true?
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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.