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1.
Which stock fund is likely the most volatile?
A fund with a P/E of 35, 25 holdings, and a 200% turnover rate. The last fund is taking on more price risk (its P/E is higher than the other funds' P/E) and per-issue risk than the others (its number of holdings is smaller), and it is trading more aggressively.
2.
Why should you study the funds in the average market capitalization section of Morningstar's style box in more detail?
The funds differ in size. Further study can tell you which funds might perform better in different market conditions; for example, very-small-cap funds might do well in an environment that favors very small companies.
3.
In the language of sector investing, the stock 'super-sectors' are divided into _______.
Cyclical, sensitive, and defensive. Each of these super-sectors breaks down into smaller ones.
4.
A fund's number of holdings tells you what?
How much per-issue risk a fund is taking on. Funds with fewer holdings are more vulnerable to troubles in one or two stocks than funds with more holdings are. Sector weightings reveal a fund's sector risk, while P/E and P/B ratios relative to a fund's peers reflect price risk.
5.
A fund's turnover rate is usually calculated _______.
Once a year. As a rule, turnover rates are calculated yearly.
