A Key Reason That Actively Managed Funds Have Lower Returns

question 26

Multiple Choice

A key reason that actively managed funds have lower returns than index funds with a similar level of risk is that:

• A) Index funds require more buying and selling to generate their returns
• B) Management and trading costs reduce the returns of actively managed funds
• C) Index funds spend more on research and management
• D) Diversification is more important to actively managed funds

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Definitions:

Vulnerability

The quality or state of being exposed to the possibility of being attacked or harmed, either physically or emotionally.

Depressed Patients

Individuals diagnosed with depression, a mood disorder characterized by persistent feelings of sadness, loss of interest, and other emotional and physical problems.

Cortisol

A steroid hormone produced by the adrenal glands, involved in the body's stress response as well as metabolism and immune function.

Elevated Levels

Higher than normal amounts or concentrations of a particular substance or variable in a given context.