ECONOMICS
FINANCIAL MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A fund which is active
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A fund which can be traded in an exchange
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A fund which is passive
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A fund with higher fees
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Detailed explanation-1: -“Indexing” is a form of passive fund management. Instead of a fund portfolio manager actively stock picking and market timing-that is, choosing securities to invest in and strategizing when to buy and sell them-the fund manager builds a portfolio whose holdings mirror the securities of a particular index.
Detailed explanation-2: -The fact that an ETF directly maps an index is a passively managed fund’s feature. If an investor is looking for active management, can financially afford an active fund, and the risks and goals are in line then active funds could be considered.
Detailed explanation-3: -Index investing is perhaps the most common form of passive investing, whereby investors seek to replicate and hold a broad market index or indices. Passive investment is cheaper, less complex, and often produces superior after-tax results over medium to long time horizons than actively managed portfolios.
Detailed explanation-4: -Passively managed funds include passive index funds, exchange-traded funds (ETFs), and Fund of funds investing in ETFs. These funds follow a benchmark and aim to deliver returns in tandem with the benchmark, subject to expense ratio and tracking error.
Detailed explanation-5: -An “index fund” is a type of mutual fund or exchange-traded fund that seeks to track the returns of a market index. The S&P 500 Index, the Russell 2000 Index, and the Wilshire 5000 Total Market Index are just a few examples of market indexes that index funds may seek to track.