Choose wisely. There is only one correct answer to each question.
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1.
If you own one fund from a boutique fund family, how many other funds should you own from that same family if you value diversification?
None. If you own more than one fund run by a boutique or specialist shop, chances are you own two (or more) of the same thing. Boutiques focus on what they do best, and as a result owning more than one of their funds often results in overlap.
2.
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.
3.
If you own one fund run by Manager A, how many other funds of his or hers should you own if you value diversification?
None. Managers generally have ingrained investment habits that they apply to every pool of money they run; they'll rarely use a growth strategy on one portfolio and a value strategy on another.
4.
If you have a lot of diversity among individual stocks, what does that say about your diversity in particular sectors of the market?
It can't be determined. A diverse collection of stocks might actually share exposure to certain sectors. Tech is a good example of such a sector.
5.
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.
