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Funds 208: Examining a Stock Fund's Portfolio: Style Box Statistics

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1.
A fund's number of holdings tells you how much sector risk a fund is taking on.
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False. The number of holdings tells you how much per-issue risk a fund is taking on.
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.
Sector weightings in a fund tell you how much price risk a fund is taking on.
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False. Sector weightings tell you the industries your manager favors.
4.
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.
5.
Why should you study the funds in the average market capitalization section of Morningstar's style box in more detail?
Choose wisely. There is only one correct answer.
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.