An index fund does not try to beat the market; it tries to match it, holding a small piece of every company in a chosen index rather than betting on which few will outperform. This modesty of ambition turns out to be a strength. Funds that actively pick stocks charge higher fees to pay the analysts doing the picking, and most of them fail to outperform a simple index fund over long stretches once those fees are subtracted. The index fund's advantage is not superior insight into which companies will thrive; it is simply spending less on the attempt to guess.
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Correct answer to question 119 (Paragraph Comprehension): An index fund often outperforms actively managed funds mainly by charging lower fees rather than by superior stock picking
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The passage states the index fund's advantage is not superior insight but simply spending less on the attempt to guess, tying its performance to lower fees rather than picking skill.
Updated: November 2026
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