Which investment is designed to try to match a market index by holding a broad mix of assets?

• A. Mutual Fund
• B. Index Fund
• C. ETF
• D. Stock

Answer: (B)

The idea being tested is reproducing a market’s performance by owning a broad slice of its components. An index fund is designed to mirror a benchmark by holding a wide mix of the same securities that make up the index, either in the same weights or a close representation. This passive approach aims to match, not beat, the index, so you get broad diversification with typically lower costs and turnover than active management. A single stock can’t provide broad market exposure, and while an ETF can also track an index, the description fits the intent of an index fund most directly. A mutual fund could be actively managed and not intended to match an index, so it doesn’t fit the stated goal as cleanly.