Answered

Welcome to Westonci.ca, where you can find answers to all your questions from a community of experienced professionals. Discover a wealth of knowledge from experts across different disciplines on our comprehensive Q&A platform. Discover detailed answers to your questions from a wide network of experts on our comprehensive Q&A platform.


Explain why a passively managed fund guarantees the average return of the individual securities in that fund, but it cannot ever outperform the return of the index it tracks. What is one advantage and one disadvantage of this strategy?

Sagot :

Parrain

The reason a passively managed fund would guarantee the average return on individual securities is that the fund follows the index completely with little to no deviation.

What is a passively managed fund?

This is a fund that does not have an investment team behind it that try to beat the market by predicting returns. Instead this fund follows the index as it is.

This means that whatever the index has a return is the same return the fund would have.

The advantage of this is that such a fund would not incur any management fees which makes it cheaper.

A disadvantage however, is that its returns are tied to the index and if the index makes below average returns or losses, the fund will be affected.

Find out more on passively managed funds at https://brainly.com/question/14077557.

We appreciate your visit. Our platform is always here to offer accurate and reliable answers. Return anytime. We hope this was helpful. Please come back whenever you need more information or answers to your queries. Thank you for visiting Westonci.ca, your go-to source for reliable answers. Come back soon for more expert insights.