Quiz: Index Funds and ETFs 3 questions · 80% to pass 1. An S&P 500 index fund holds:The 500 cheapest stocks on the marketApproximately 500 of the largest US public companies, weighted by market cap500 stocks chosen by a fund managerAll publicly traded companies in the USThe S&P 500 tracks approximately 500 of the largest US public companies, weighted by market capitalization. It is passively managed: no human picks the stocks.2. Why do index funds typically outperform actively managed funds over 15+ year periods?They pick better stocksLower fees compound into significant savings that most managers cannot overcomeThey are insured by the governmentThey avoid all market downturnsIndex funds charge 0.03-0.20% annually vs 0.5-1.5% for active funds. Over decades, that fee difference compounds into tens or hundreds of thousands of dollars that active managers rarely overcome through stock picking.3. The main difference between an ETF and a mutual fund is:ETFs are riskierETFs trade on exchanges throughout the day; mutual funds price once daily after market closeMutual funds are always cheaperETFs can only hold stocksETFs trade on stock exchanges like individual stocks with real-time pricing. Mutual funds calculate their net asset value once per day after markets close, and all orders execute at that price. Check answers Retake quiz Back to lesson Next lesson →