Choose wisely. There is only one correct answer to each question.
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1.
As a general rule, a "focused fund" would hold _______ stocks.
Fewer than 40. There is no precise number, but this is a general rule.
2.
In terms of risks and rewards, investing in a focused fund is similar to investing in _______.
A basket of individual stocks. Owning a focused fund is most similar to owning a bunch of individual companies. Index funds tend to be broadly diversified reflections of a major market index. Fixed-income funds invest in bonds.
3.
Which focused fund should you be wary of?
A fund with a 2% expense ratio. A focused fund with expenses higher than 2% should be regarded with suspicion.
4.
Managers of focused funds defend their portfolios by saying that they can better generate returns with a handful of top-quality stocks than a large collection of stocks.
True. That is their rationale for creating the portfolios, and some investors are attracted to that.
5.
What criteria determine whether a fund is "focused"?
All of the above. A fund can be considered focused if it fits any of these criteria.
