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Funds 403: Using Focused Funds

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1.
As a general rule, a "focused fund" would hold _______ stocks.
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Fewer than 40. There is no precise number, but this is a general rule.
2.
A fund that holds only 5 stocks could be considered a focused fund.
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True. As a rule, a focused fund holds fewer than 40 stocks.
3.
What criteria determine whether a fund is "focused"?
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All of the above. A fund can be considered focused if it fits any of these criteria.
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.
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True. That is their rationale for creating the portfolios, and some investors are attracted to that.
5.
Which of the following should you expect when you invest in a focused fund?
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Occasional short-term volatility. While a focused fund may have an inexperienced manager or high expenses, investors should almost always expect some short-term volatility.