SIE (Securities Industry Essentials) Practice Exam

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Prepare for your Securities Industry Essentials Exam. Engage with multiple-choice questions designed to enhance your understanding of the financial industry. Build your confidence and knowledge base as you get ready for your certification!

Practice this question and more.


Which of the following is an advantage of index funds?

  1. Highly active management

  2. Higher potential returns

  3. Lower management fees due to passive management

  4. Personalized investment advice

The correct answer is: Lower management fees due to passive management

Index funds are passively managed, meaning that they aim to replicate the performance of a market index rather than actively trying to outperform it. This reduces the amount of work and resources needed to manage the fund, resulting in lower management fees. Therefore, out of all the choices, C is an advantage because it allows investors to save on fees and potentially increase their overall returns. A, B, and D are not advantages of index funds because they involve higher costs (such as hiring a fund manager or seeking personalized advice) and may not result in better returns since index funds typically outperform actively managed funds in the long run.