One type of passive portfolio management is ________.
A) investing in a well-diversified portfolio without attempting to search out mispriced securities
B) investing in a well-diversified portfolio while only seeking out passively mispriced securities
C) investing an equal dollar amount in index stocks
D) investing in an equal amount of shares in each of the index stocks

Question

Quizplus · Accepted Answer

Passive portfolio management involves investing in a well-diversified portfolio without attempting to search out mispriced securities. This approach minimizes the need for active management and aims to match the performance of a specific market index. This is usually done through investing in index funds or exchange-traded funds (ETFs) that track the performance of a specific index. Choice B is incorrect as investing in passively mispriced securities contradicts the idea of passive management. Choice C and D are also incorrect as they do not ensure a well-diversified portfolio.

One Type of Passive Portfolio Management Is ________