Multi-Source Reasoning - Dichotomous

Incorrect.

While the second author, based on the description of passive management, would likely agree that the trade-off in passive management is the inability to make decisions on where money is invested, the first author does not discuss this aspect. Although the first author's focus on the rising problem that as indexed mutual funds continue to gain in popularity, the effects on the market will be detrimental to individuals might seem to imply that this is the greatest disadvantage to passive investment, a disagreement cannot be inferred because the first author does not discuss the ability to make decisions in passive investment.

Correct!

In looking at both of the authors' descriptions of passive management, the second author focuses more on how both forms of investment work, and would likely reason that the downside to passive management is the inability to decide where money is invested. The first author does not mention this factor and focuses more on the potential implications of too much passive investment on the future effects of indexed mutual funds. Even though it is possible that the first author would consider this worse than the factor of decision making, there is not enough support to infer a disagreement.

Incorrect.

While the second author does explicitly state that portfolios of passive investors span broad sectors of the market, the first author suggests that money pours into the most valuable companies. Although you might think this implies a disagreement, there is no understanding from the first author that these valuable companies do not also span across diverse sectors of the market.

Correct!

Even though it seems like the first author is suggesting that passive investment lacks diversity because it pours money into the most valuable companies, the second author states that passive investment spans broad sectors of the market, which creates a diverse portfolio. Here you can't infer a disagreement, because the valuable companies can still span broad sectors of the market and create a diverse portfolio. Also, in relation to active investment, there is no sense that active investors are widening their investment portfolios, but rather that they have more agency to choose where they invest their money.

Correct!

While the second author implies that active investment is always riskier than passive investment, the first author indicates that increased passive investment can in fact pose risks to investors in the long run, so here you can infer a disagreement.

Incorrect.

The first author indicates that, prior to 1975, all investment was active. Since the second author indicates that active investment is riskier in general, that would likely accord with this statement. However, the first author points to the fact that passive investment may pose risks in the future as more and more individuals choose indexed mutual funds, which may be detrimental to individuals.