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1.
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.
2.
A fund's turnover rate tells you how frequently the manager trades the portfolio.
True. Buy-and-hold managers will have lower turnover rates than managers who buy and sell stocks on short-term factors.
3.
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.
4.
Price/earnings multiples tell you what?
How much price risk a fund is taking on. The greater a fund's price/earnings multiple, the greater its price risk.
5.
A fund's number of holdings tells you how much per-issue risk a fund is taking on.
True. 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.
