Is an index-based portfolio a fit for your institution?

Twelve questions for investment committees of endowments, foundations, and nonprofits. See how your governance, resources, and priorities line up with an index-based approach built on low-cost funds. It takes about five minutes.

Terms used in this quiz
Index fund
A mutual fund or exchange-traded fund that seeks to hold the securities of a market index, rather than selecting individual securities it expects to outperform.
Active management
An approach in which a manager selects securities or times the market in an attempt to outperform a benchmark.
Alternative investments
Investments outside publicly traded stocks, bonds, and cash, such as private equity, venture capital, hedge funds, and private real estate.
Capital call
A request from a private fund for investors to contribute part of the money they previously committed, on the fund's schedule rather than the investor's.
Exchange-traded fund (ETF)
A fund whose shares trade on a stock exchange throughout the day. Many ETFs seek to track a market index.
Passive fund
A fund that seeks to track a market index rather than select securities. In this quiz the term is used interchangeably with index fund.
Liquidity
How quickly an investment can be sold and converted to cash at a price close to its recent value. Liquidity can be reduced in stressed markets.
Emerging markets
Countries whose economies and financial markets are generally less developed than those of major industrialized nations. Investments there can carry higher risk, including currency and political risk.
Separate account
A portfolio of securities owned directly by one investor and managed by a professional manager, rather than a share of a pooled fund.
Expense ratio
A fund's annual operating costs expressed as a percentage of its assets.
Asset-weighted average expense ratio
An average of fund expense ratios in which each fund counts in proportion to the assets invested in it, so it approximates what investors actually paid rather than what the typical fund charges.
Performance fee and carried interest
A share of investment gains paid to a hedge fund or private fund manager in addition to its annual management fee.
Investment policy statement (IPS)
A written document adopted by the board that sets an institution's investment objectives, asset allocation targets, rebalancing rules, and oversight responsibilities.
Rebalancing
Buying and selling to bring a portfolio back to its target allocation after market movements have shifted it.
Outsourced chief investment officer (OCIO) / discretionary management
An arrangement in which the board delegates day-to-day investment decisions to an outside adviser, which implements them within the board's investment policy.
Non-discretionary advice
An arrangement in which an adviser makes recommendations and the board or committee makes and carries out each decision.

Important information

This quiz is for educational purposes and is intended for investment committee members and staff of foundations, endowments, and other nonprofit organizations. Results are based on general considerations only. They are not a recommendation or investment advice for any particular institution and do not take into account your full circumstances, investment policy, or legal obligations. Nothing in this quiz is tax or legal advice.

How this quiz works. Each scored answer adds points according to how closely it matches circumstances in which an index-based approach faces fewer obstacles, using criteria chosen by IFA. The total places you in one of three general bands. The scoring is not an independent or objective measure of suitability, has not been tested against investment outcomes, and does not evaluate any specific investment, manager, fund, or portfolio. IFA offers index-based portfolio management and advisory services for a fee and therefore has a financial interest in institutions adopting an index-based approach. Results may differ each time you take the quiz and will change as your circumstances change. This page does not send or save your answers. They are used only to produce the results shown on this screen and are cleared when you close the page or retake the quiz.

Index Fund Advisors, Inc. (IFA) is an SEC-registered investment adviser; however, such registration does not imply a certain level of skill or training and no inference to the contrary should be made.

All investing involves risk, including the possible loss of principal. Index funds do not eliminate market risk; when markets decline, an index portfolio declines with them, and its value can fall significantly. Diversification does not guarantee a profit or protect against loss in declining markets. Lower costs do not guarantee better results. An index-based portfolio will at times trail other approaches, including for extended periods. Past performance does not guarantee future results.

Sources: CFA Institute, Enterprising Investor blog, "Vanguard's Former OCIO Clients Must Stand Their Ground," by Mark J. Higgins, CFA, July 3, 2024 (the author's opinion, which does not necessarily reflect the views of CFA Institute). Bloomberg News, report on David Swensen's remarks at the John C. Bogle Legacy Forum, January 2012, as published by Financial Advisor magazine (fa-mag.com). Morningstar, Inc., 2026 US Fund Fee Study, May 2026, data as of December 31, 2025 (asset-weighted average expense ratios of US open-end mutual funds and ETFs, active and passive). The $50 million fee example is a simple arithmetic illustration, not the cost of any actual portfolio.