Certified Financial Planner (CFP) Practice Exam · Question
Scenario 19: Which investment philosophy advocates for minimizing active trading and expenses by investing in broad market index funds?
Passive investing, often through index funds or ETFs, aims to replicate the performance of a broad market index rather than trying to outperform it through acti
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Question: Scenario 19: Which investment philosophy advocates for minimizing active trading and expenses by investing in broad market index funds?
Answer options:
- Value investing
- Growth investing ✅ Passive investing
- Market timing
Correct answer: Passive investing
Explanation: Passive investing, often through index funds or ETFs, aims to replicate the performance of a broad market index rather than trying to outperform it through active management, thus minimizing trading and expenses. The correct answer is "Passive investing". This capacity-fill scenario 19 reinforces the same competency for the cfp bank and follows the certified explanation standard.
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