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1.
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.
2.
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.
3.
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.
4.
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.
5.
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.
