Yakov and Ana are building their portfolios. Yakov purchases shares in a mutual fund and pays fees to a manager


Yakov and Ana are building their portfolios. Yakov purchases shares in a mutual fund and pays fees to a manager who actively manages the mutual fund’s portfolio. He does so because he believes that the manager can identify inexpensive stocks that will rise in value. Ana is not convinced. She buys shares in an index fund—a type of mutual fund that simply buys all of the stocks in a given stock index rather than actively managing a portfolio. Yakov builds his portfolio on the supposition that: Stock prices follow a random walk. The stock market exhibits informational efficiency. Stock analysts can use fundamental analysis to identify undervalued stocks.


Leave a Reply

Your email address will not be published. Required fields are marked *