Index funds are popular among investors because of low fees and ease of diversification, which are possible because the fund manager purchases the stocks that make up the index and does not actively buy and sell shares to outperform the index .

Question

Index funds are popular among investors because of low fees and ease of diversification, which are possible because the  fund manager purchases  the stocks that make up the index and does not actively buy and sell shares to outperform the  index .

Quizplus · Accepted Answer

Index funds aim to match the performance of a specific index, such as the S&P 500, by holding all or a representative sample of the stocks in the index. This passive management strategy results in lower fees and offers diversification, as the fund's performance is tied to the broad market or specific sector performance of the index it tracks, without attempting to outperform it through active trading.

Index Funds Are Popular Among Investors Because of Low Fees