Final answer:
The statement that is not true of index mutual funds is that their management fees are slightly higher than those of similar managed funds. Index mutual funds are known for having lower management fees due to their passive investment strategies and computerized stock selection process.
Step-by-step explanation:
The question 'Which of the following is not true of index mutual funds?' deals with the characteristics of index mutual funds. To clarify, the option that is not true about index mutual funds is D. Their management fees are slightly higher than similar, managed funds. In fact, index mutual funds are known for their low management fees due to their passive management strategy. They track the performance of a stock market index and are not managed by financial analysts or fund managers who actively select stocks, which keeps the costs down.
Index mutual funds generally perform in line with the market averages they mimic, hence A is not the correct answer. They are often no-load funds, which means they don't carry sales charges, making B a true statement. Option C is also correct; the stocks in an index mutual fund's portfolio are often selected by computer algorithms designed to replicate the components of a particular market index. Therefore, option D is the odd one out as it incorrectly suggests that the management fees for index mutual funds are higher, when in reality they are typically lower than those of actively managed funds.