Quiz: Index Funds and ETFs

3 questions · 80% to pass

1. An S&P 500 index fund holds:

The S&P 500 tracks approximately 500 of the largest US public companies, weighted by market capitalization. It is passively managed: no human picks the stocks.

2. Why do index funds typically outperform actively managed funds over 15+ year periods?

Index funds charge 0.03-0.20% annually vs 0.5-1.5% for active funds. Over decades, that fee difference compounds into tens or hundreds of thousands of dollars that active managers rarely overcome through stock picking.

3. The main difference between an ETF and a mutual fund is:

ETFs trade on stock exchanges like individual stocks with real-time pricing. Mutual funds calculate their net asset value once per day after markets close, and all orders execute at that price.

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