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1.
A fund's turnover rate tells you what?
How frequently the manager trades the portfolio. Buy-and-hold managers will have lower turnover rates than managers who buy and sell stocks on short-term factors.
2.
A fund's number of holdings tells you how much sector risk a fund is taking on.
False. The number of holdings tells you how much per-issue risk a fund is taking on.
3.
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.
4.
Sector weightings in a fund tell you what?
What industries your manager favors. If a fund has 50% of its portfolio in the technology sector, for example, half of its performance will be determined by the strength or weakness of that one sector.
5.
In the Morningstar style box, all the small-cap funds are the same size.
False. The funds vary dramatically in market capitalization; therefore, you should examine the size of each.
