Choose wisely. There is only one correct answer to each question.
0%
Keep studying!
Review your answers below to learn more.
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.
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.
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.
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.
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.
