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1.
What is not something funds typically do to handle asset growth?
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Own fewer stocks. Funds can close or change their strategies when faced with too many assets, or the fund managers may hold cash or buy more stocks.
2.
If you're a mutual fund investor concerned about asset growth, what should you do?
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Favor funds with low turnover rates. The less a fund trades, the lower its trading cost. Aggressive, fast-trading funds will only be hurt more by asset growth. And by avoiding all small-company funds, you're missing out on a large part of the market.
3.
Why can very large funds have difficulty buying very small stocks?
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Because it's tough to put large dollar amounts to work in a small stock without affecting its share price. Small-cap stocks take up less than 10% of the U.S. market's overall assets; large caps, meanwhile, account for about two thirds of the U.S. market. It's therefore easier for a fund manager with a lot of assets to buy bigger companies than to own a small fry.
4.
When it comes to buying stock for itself, the larger a fund is, the _______ it will be to boost a stock's share price.
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More likely. It will help boost a stock's share price simply by bidding on its shares, and the larger the fund is, the bigger the effect will be.
5.
Once a fund closes, it does not take in any more investments from existing shareholders.
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False. Many funds do actually continue to take in new investments from their existing shareholders after they close.