Explanation:
The most suitable recommendation is an index fund or ETF.
Why:
Why the other choices are less appropriate:
So the best recommendation is A.
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Question 21.7.3. Joe is a 29-year-old single male who prefers to invest in a fund because he has neither the time nor interest to spend researching and selecting individual stocks. His financial advisor Sally is experienced in the following fund categories: closed- and open-end mutual funds, hedge funds, and index funds. When Sally asks for Joe’s preferences, his only strongly felt opinion is that he prefers to avoid paying high expenses or fees (reading the financial news gives him the impression that he should seek low fees because fees are trending toward zero). Which of the following is she MOST LIKELY to recommend to Joe?
A
An index fund (or exchange-traded fund, ETF) to achieve diversification with low fees
B
An active closed-end mutual fund that trades below its net asset value (NAV) because it will outperform as it pulls to maturity
C
A fund of hedge funds (FOHF) in order to overcome the principal-agent problem and ensure alignment between Joe's interest and the managers
D
An open-end mutual fund that has beaten the market in the prior three consecutive years because mutual fund performance tends to be persistent
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