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A key reason that actively managed funds have lower returns than index funds with a similar...

A key reason that actively managed funds have lower returns than index funds with a similar level of risk is that:

a)Diversification is more important to actively managed funds

b)Management and trading costs reduce the returns of actively managed funds

c)Index funds spend more on research and management

d)Index funds require more buying and selling to generate their returns

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Answer #1

Option B. Management and trading costs reduce the returns of actively managed funds

Explanation: Returns from actively managed funds get reduced because of management and trading costs involved in such funds.

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