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1.
Price/earnings multiples tell you what?
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How much price risk a fund is taking on. The greater a fund's price/earnings multiple, the greater its price risk.
2.
A fund's turnover rate tells you how frequently the manager trades the portfolio.
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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?
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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.
Sector weightings in a fund tell you what?
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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.
A fund's number of holdings tells you what?
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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.