How do actively managed funds differ from passively managed funds?
A) Managers of actively managed funds use their discretion to buy and sell assets as they attempt to generate higher returns.
B) Actively managed funds focus on stocks; passively managed funds focus on bonds.
C) Actively managed funds necessarily contain a greater variety of stocks or bonds than does a passively managed fund.
D) Actively managed funds consistently outperform passively managed funds.

Question

Quizplus · Accepted Answer

Actively managed funds are managed by professionals who use their discretion in buying and selling assets to try to achieve higher returns. Passively managed funds, on the other hand, aim to replicate the performance of a market index or benchmark and do not involve active buying and selling decisions. Therefore, option A is the correct answer. Option B and C are incorrect as there are both actively and passively managed funds in stocks and bonds. Option D is also incorrect because there is no definitive proof that actively managed funds consistently outperform passively managed funds.

How Do Actively Managed Funds Differ from Passively Managed Funds