The value of an investment in an index fund depends on

Question

Quizplus · Accepted Answer

The value of an investment in an index fund is based on the performance of the stocks in the index being tracked. Therefore, the value of the investment depends on what happens to the prices of all the stocks in that index. The earnings estimate for the major index constituent and the specific stock selection practices employed by the fund manager are not relevant as index funds are designed to track the performance of an entire index rather than individual stocks. The average performance of all mutual funds is also not relevant as it does not necessarily reflect the performance of the specific index being tracked.

The Value of an Investment in an Index Fund Depends