Funds Beginner: Introduction to Index Funds

Test your knowledge

Choose wisely. There is only one correct answer to each question.

0%
Keep studying!
Review your answers below to learn more.
1.
Index mutual funds can outperform the whole market.
Choose wisely. There is only one correct answer.
False. Because an index fund is based on a particular measure of the market, it cannot outperform the whole market.
2.
Why are management expenses in index funds low?
Choose wisely. There is only one correct answer.
All of the above. All of these explain why management expenses are low.
3.
Index mutual funds try to ________ a particular market index.
Choose wisely. There is only one correct answer.
Perform as well as. Index funds choose the securities in a particular index to match its performance.
4.
What accounts for the fact that different mutual funds that use the same index tend to perform differently?
Choose wisely. There is only one correct answer.
They do not allocate their securities in the same way. Different funds buy more or less of each security than other funds do.
5.
An investor in index funds may pay little in capital gains taxes because the securities in his or her fund are inexpensive.
Choose wisely. There is only one correct answer.
False. Small amounts of capital gains are explained by the fact that the securities in index funds are rarely sold.