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Funds Beginner: Introduction to Index Funds

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1.
Index mutual funds can outperform the whole market.
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False. Because an index fund is based on a particular measure of the market, it cannot outperform the whole market.
2.
An investor in index funds may pay little in capital gains taxes because the securities in his or her fund are inexpensive.
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False. Small amounts of capital gains are explained by the fact that the securities in index funds are rarely sold.
3.
Index funds buy an equal number of shares of each security in their chosen index.
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False. Many of them buy more or fewer of a particular security.
4.
Because the securities in index mutual funds are ________, there are few capital gains distributions from them.
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Not traded frequently. They are kept for long periods because their underlying indexes rarely add or drop securities.
5.
Why are management expenses in index funds low?
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All of the above. All of these explain why management expenses are low.