How Do Index Funds Keep Their Expense Ratios Low

question 43

Multiple Choice

How do index funds keep their expense ratios low?

• A)They trade stocks,often for maximum gains.
• B)They maintain their holdings in the same proportion as well-known indexes.
• C)They have a team of professionals watch for the best options so as to continually tune the fund's performance.
• D)They hold less than 20 companies in the fund.

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Definitions:

College Education

Attaining higher education and academic degrees from colleges or universities.

Lump Sum

A one-time payment made instead of breaking the payment down into installments.

Funds

Resources set aside for a particular purpose, often referring to money reserved for investment or operational purposes in financial contexts.

Compounded Annually

The process where the interest earned on an investment is reinvested, and subsequent interest calculations are made on the initial principal plus all accumulated interest.