NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Scheme Related Information
Which type of mutual fund scheme is most suitable for an investor who wants to track a market index at low cost with minimal fund manager discretion?
An index fund suits this investor because it passively replicates a market index, holding the same stocks in the same proportions. Without active stock selection, costs are lower and the returns closely follow the index, subject to a small tracking error.
- ASectoral fund
- BIndex fundCorrect
- CDynamic asset allocation fund
- DFund of funds investing in hedge funds
Explanation
An index fund passively replicates an index's constituents and weights, so it needs little active management and has a low expense ratio. Sectoral and dynamic funds involve active decisions.
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