What is a key difference between actively managed funds and Tracker Funds?

The chosen answer highlights a fundamental characteristic of actively managed funds. Actively managed funds are designed with a specific investment strategy in mind, where fund managers make decisions to select stocks and other assets based on research, market analysis, and economic factors. This approach aims to outperform a specific benchmark or index through strategic selection and timing.

In contrast, Tracker Funds, also known as index funds, are designed to mimic the performance of a specific index. They invest in the same stocks that comprise the index they track, without the active decision-making involved in stock selection. This key difference underscores why option C is the correct choice, as it directly addresses the investment strategy that defines actively managed funds.

Other choices do not accurately encapsulate the essential distinctions between actively managed funds and Tracker Funds. For instance, actively managed funds typically have higher fees due to the comprehensive research and management required, which contrasts with the lower fees often associated with Tracker Funds. Similarly, while Tracker Funds aim to reflect long-term growth aligned with their index, they might not necessarily be the best choice for short-term gains, as their performance is tied to market movements over time without the active adjustments seen in actively managed funds. Finally, the statement about Tracker Funds requiring no management oversight is misleading; they do