SIE (Securities Industry Essentials) Practice Exam

Disable ads (and more) with a membership for a one time $2.99 payment

Ace your Securities Industry Essentials (SIE) Exam with Examzify! Our practice exam features flashcards, multiple-choice questions with detailed explanations, and insightful tips to ensure your success.

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

Which of the following is an advantage of index funds?

Highly active management
Higher potential returns
Lower management fees due to passive management
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.