Multi-Source Reasoning - Multiple Choice
Incorrect.
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Although the historian questions the long-term viability of indexed mutual funds due to an imbalance in passive and active investment, this does not necessarily mean that prior to the introduction of passive investment, the market was healthier.
Incorrect.
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While passive investment might be a simpler solution for individuals with low knowledge of the stock market, there is no indication in the passage that more people overall are investing their money. Rather, the author suggests that the way in which individuals are investing their money has changed.
Incorrect.
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Even though a discussion of the future may be hypothetical, there seems to be a reasonable amount of conviction that passive investment can have detrimental effects on the market if not balanced with active investment.
Incorrect.
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While the author doesn't seem confident about passive investment, there is no implication that individuals are better off not investing their money at all. Rather, there must be a balance in the type of investment in the bigger picture in order to secure better results for passive investors.
Correct!
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The author of the first passage indicates that the primary challenge with passive investment is that it pours money into the same valuable companies, and their value becomes distorted. It is reasonable to infer that passive investment will continue to support these same companies and make it increasingly difficult for new companies to emerge on the market and find investment.
