Final answer:
True, the value of a share in an index mutual fund increases when the index it mirrors increases, reflecting the market's performance.
Step-by-step explanation:
True, because an index mutual fund's purpose is to reflect the performance of a specific index, when that index increases in value, the dollar value of a share in the index fund typically increases correspondingly. This mirrors the fluctuations in the market that the index represents.
Index funds are designed for diversification, spreading investment across various stocks or bonds to mitigate risk. Consequently, the return an investor receives from an index fund is based on the fund's overall performance, which aims to track the behavior of the stock market as closely as possible.
An index mutual fund is designed to mirror the performance of a specific stock market index, such as the S&P 500. When the index increases, the dollar value of a share in an index fund also increases.
This is because the index fund holds a diversified portfolio of stocks that closely matches the composition of the index, so as the index goes up, the value of the stocks in the fund goes up as well.