When a fund manager tries to pick stocks to outperform the market averages, the mutual fund is called a(n):
A) active fund.
B) passive fund.
C) random walk fund.
D) loaded fund.

Question

Quizplus · Accepted Answer

An active fund is a mutual fund in which the fund manager tries to pick stocks that outperform the market averages. This is in contrast to a passive fund (B), which simply tracks a market index, a random walk fund (C), which is based on the theory that stock prices are unpredictable and therefore attempts to capitalize on this by random stock selection or a loaded fund (D), which has a sales charge or commission.

When a Fund Manager Tries to Pick Stocks to Outperform