Which of the following is a key advantage of equal-weight index funds? Option: "They offer increased stability in volatile markets due to their focus on blue-chip stocks.", "They prioritize momentum-driven investing, capitalizing on short-term market trends.", "They promote true diversification by spreading risk equally across all constituents.", "They minimize transaction costs, leading to lower expense ratios."

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Which of the following is a key advantage of equal-weight index funds?

"They offer increased stability in volatile markets due to their focus on blue-chip stocks."

"They prioritize momentum-driven investing, capitalizing on short-term market trends."

"They promote true diversification by spreading risk equally across all constituents."

"They minimize transaction costs, leading to lower expense ratios."

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What is the core principle behind equal-weight index funds?

"Weighted market cap allocation does not guarantee returns, and diversification is crucial."

"Momentum-based investing is superior to value investing for long-term growth."

"Market-cap-weighted allocation is the most effective strategy for maximizing returns."

"Historical performance is the primary indicator of future stock performance."

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How do equal-weight index funds address the limitations of market-cap-weighted funds?

"By focusing on high-growth startups, capitalizing on emerging market trends."

"By excluding large-cap stocks to promote the growth of small and medium enterprises."

"By investing an equal amount of money in each stock within the fund, regardless of company size."

"By allocating funds based on the past performance of companies, ensuring consistent returns."

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What potential drawback is associated with equal-weight index funds?

"They tend to have lower expense ratios due to reduced transaction costs."

"They may underperform in volatile markets compared to funds with a higher concentration of blue-chip stocks."

"They fail to adapt to stock splits and mergers, leading to imbalanced allocations."

"They overemphasize large-cap stocks, leading to a lack of diversification."

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What is a significant advantage of index funds for risk-averse investors who prioritize stability and capital preservation in their portfolios?

Active management by experienced professionals to navigate market fluctuations

Amplified exposure to market volatility for potential high returns

Tax-efficient structure with minimal capital gains distributions

Diversification across a wide range of asset classes and sectors

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What is a key advantage of balanced funds for investors?

Portfolio diversification

Guaranteed high returns

Focus on short-term gains

Elimination of investment risk