Question

Which of the following is CORRECT?
Select one:
A. A traditional active manager begins with a pool of investment capital, tries to identify stocks that she thinks would appreciate the most, and, therefore, would decide to include those in an investment portfolio.
B. Whatever that manager’s benchmark, if the active manager is uninformed about a particular stock, she will not hold it in the investment portfolio.
C. Exchange-Traded Funds are usually more tax-efficient in the sense that they are less likely than mutual funds to make taxable capital gains distributions.
D. Both option (A) and option (B)
E. All of the option (A), option (B) and option (C)

Answer 1

E. All of the option (A), option (B) and option (C)

A is correct. An active manager tries to identify mispriced securities to earn higher returns.

B is correct. An active manager conducts in-depth analysis of the potential stocks to be included in the portfolio. If the active manager does not have adequate information or understanding about the stock, the stock will not be included in the portfolio, even if the stock is part of the benchmark.

C is correct. ETFs are tax-efficient compared to mutual funds because they are less likely to make capital gains distributions