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1.
What do boutique funds do?
Specialize in one thing. A boutique fund will specialize in one thing, whether it is an investment objective, a part of the world, or some other aspect of investing.
2.
In the Morningstar Style Box, which square would provide diversification to a large-growth fund?
A small-value fund. The corners are the areas that show where diversification would be. A small-value fund would therefore offer the most of that.
3.
If you find that you don't have a lot of overlap in your portfolio holdings, you may still be overexposed to one or two sectors of the market.
True. Many times, a fund will have a lot of holdings in one sector. For example, a growth fund may have a lot of tech or pharmaceutical stocks.
4.
Why is portfolio overlap a greater risk for fund investors who also own individual stocks?
Because the investor's funds may also own this stock, making the investor's overall portfolio more concentrated than it seems. That means overlap.
5.
For purposes of diversification, which parts of the Morningstar Style Box should attract each other?
Opposite corners. Based on how the style box is structured, opposite corners will show the diversity.
