A:

A. Regulatory risk.

B. Market risk.

C. Liquidity risk.

D. Business risk.






Correct answer: B

Business risk is minimized with a diversified fund, and liquidity is not an issue for a fund that redeems shares each day at the NAV. But an index fund cannot protect an investor from market risk.



RELATED FAQS

  1. Does index trading increase market vulnerability?

    Learn how the rise in popularity of passive ETFs and mutual funds tracking indexes has increased the correlation among stocks, ...
  2. What is the difference between passive and active asset management?

    Find out about active asset management, passive asset management, how these strategies are utilized and the differences between ...
  3. What are the most important equity market indexes?

    Discover the most important equity market indexes. Stock market indexes are tools to evaluate the performance of the stock ...
  4. What is the 12b-1 fee meant to cover?

    Understand what a 12b-1 fee is and what it's meant to cover. Learn about how the fee works and what personal investors should ...
Related Articles
  1. Mutual Funds & ETFs

    The Top 3 ETFs For Investing in the Russell 200 Index

  2. Mutual Funds & ETFs

    ETF Analysis: SPDR S&P 500 Trust

  3. Mutual Funds & ETFs

    Why Mutual Funds are Still Better than ETFs

  4. Investing Basics

    What is the difference between passive and active asset management?

  5. Mutual Funds & ETFs

    ETF Analysis: iShares S&P 500

RELATED TERMS
  1. Next Generation Fixed Income (NGFI) Manager

    A Next Generation Fixed Income (NGFI) manager is a fixed income ...
  2. Next Generation Fixed Income (NGFI)

    Next generation fixed income is an innovative approach to investing ...
  3. Annual Crediting Cap

    The maximum rate of index growth that an annuity will be credited ...
  4. Security Market Indicator Series - SMIS

    An index that uses the performance of a sampling of securities ...
  5. Factor Investing

    An investment strategy in which securities are chosen based on ...
  6. Investment Fund

    A supply of capital belonging to numerous investors that is used ...

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!