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Ch.2 · Mutual Fund Structure Basics · easy

What is an active fund?

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EXPLANATION

An actively managed fund has a fund manager who makes investment decisions — selecting securities, timing trades — with the goal of outperforming a benchmark index. Active funds charge higher expense ratios than passive funds to cover the cost of active management.

A.A fund that trades its portfolio every day

B.A fund where the fund manager actively selects securities to outperform a benchmark index [✓ Correct]

C.A fund that actively solicits new investors through marketing

D.A fund that is actively promoted by AMFI

EXPLANATION

An actively managed fund has a fund manager who makes investment decisions — selecting securities, timing trades — with the goal of outperforming a benchmark index. Active funds charge higher expense ratios than passive funds to cover the cost of active management.

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