Funds Beginner: Introduction to Index Funds

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1.
The fact that index funds are actively managed accounts for their relatively low management expenses.
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False. Active management would increase management expenses. Computers manage most index funds, thus making them passively managed.
2.
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.
3.
What accounts for the fact that different mutual funds that use the same index tend to perform differently?
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They do not allocate their securities in the same way. Different funds buy more or less of each security than other funds do.
4.
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.
5.
Index mutual funds spread their holdings _______ among the securities in a given index.
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Either evenly or unevenly. Index funds can take either approach.