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.
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.
3.
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.
4.
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.
5.
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.