Choose wisely. There is only one correct answer to each question.
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1.
An online tool can help you find overlap in your portfolio.
True. Firms such as Morningstar have special tools on their Websites to help you analyze your portfolio for overlap.
2.
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.
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.
The Morningstar Style Box uses _______.
A fund's current portfolio. In order to gauge overlap, the box must use the most recent holdings.
5.
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.
