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1.
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.
2.
Sector weightings in a fund tell you how much price risk a fund is taking on.
False. Sector weightings tell you the industries your manager favors.
3.
Price risk is the risk that securities will cost too much.
False. Price risk is the risk that securities will be overvalued by the market.
4.
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.
5.
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.
