Multiple choice

How would you measure the performance of an Equity Index Fund?

  1. There is no need to benchmark an Equity Index Fund

  2. By comparing it with return on Government securities

  3. By comparing its performance with a money market mutual fund

  4. By comparing its performance with the Index it is designed to track
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

An Equity Index Fund is designed to replicate the performance of a specific market index. The only meaningful way to measure its performance is by comparing it with the index it tracks. Tracking error (deviation from the index) is the key metric for evaluating how well the fund fulfills its purpose.

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