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1.
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.
2.
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.
3.
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.
4.
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.
5.
A fund's turnover rate is usually calculated _______.
Once a year. As a rule, turnover rates are calculated yearly.
