What is the primary characteristic of index funds?

They aim to surpass market performance. They are actively managed by portfolio managers. They replicate the composition of a specific market index. They exclusively focus on high-growth technology stocks.

Which type of mutual fund typically has higher expense ratios due to active management?

Index funds Passively managed funds Actively managed funds Exchange-traded funds (ETFs)

What is a key advantage of index funds compared to actively managed funds?

Potential for higher returns Frequent trading by fund managers Lower expense ratios Customization based on investor preferences

What is a potential drawback of investing solely in index funds?

They may underperform in bullish markets. They require constant monitoring and rebalancing. They have high management fees. They lack diversification across asset classes.

Which investment approach aligns with the philosophy of "it's hard to beat the market"?

Active management Value investing Growth investing Passive management