Which one of the following statements is correct?
A)Professional money managers outperformed the Vanguard 500 Index Fund on an annual basis more than half the time for the period 1986-2014.
B)Purchasing and holding a broad-based index fund is a highly recommended means of investing.
C)The number of general equity mutual funds has decreased over the past 20 years due to their underperformance as compared to index funds.
D)The survivorship bias lowers the returns earned by professional money managers as a group.
E)In an efficient market, there is no need for professional money managers.

Question

Quizplus · Accepted Answer

Purchasing and holding a broad-based index fund is a highly recommended means of investing. This is a widely accepted statement in the investment community. The other options are incorrect: A) Many studies have shown that professional money managers, on average, underperform the market. B) The number of general equity mutual funds has actually increased over the past 20 years. C) Survivorship bias may actually overstate the returns earned by professional money managers. D) Even in an efficient market, there may be a need for professional money managers for various reasons, such as asset allocation, risk management, and behavioral coaching.

Which One of the Following Statements Is Correct