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1.
The large differences in size among funds in the "small-cap" section of the Morningstar style box mean that _______.
Some will outperform others at times. Some funds will perform better than others during market conditions that favor the companies they hold.
2.
Price risk is the risk that securities will be overvalued by the market.
True. Price risk can be illustrated with price/earnings and price/book ratios.
3.
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.
4.
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.
5.
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.
