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1.
Which of the following would not qualify as a focused fund?
A fund that has the exclusive attention of its manager. A focused fund owns a few stocks, invests a lot of its assets in its top-10 stocks, or both. One that has a manager's devoted attention is not necessarily a focused fund.
2.
As a general rule, a "focused fund" would hold _______ stocks.
Fewer than 40. There is no precise number, but this is a general rule.
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.
A fund that holds only 5 stocks could be considered a focused fund.
True. As a rule, a focused fund holds fewer than 40 stocks.
