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Funds 208: Examining a Stock Fund's Portfolio: Style Box Statistics

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1.
The large differences in size among funds in the "small-cap" section of the Morningstar style box mean that _______.
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Some will outperform others at times. Some funds will perform better than others during market conditions that favor the companies they hold.
2.
A fund's turnover rate tells you how frequently the manager trades the portfolio.
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True. Buy-and-hold managers will have lower turnover rates than managers who buy and sell stocks on short-term factors.
3.
A fund's number of holdings tells you what?
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How much per-issue risk a fund is taking on. Funds with fewer holdings are more vulnerable to troubles in one or two stocks than funds with more holdings are. Sector weightings reveal a fund's sector risk, while P/E and P/B ratios relative to a fund's peers reflect price risk.
4.
Which stock fund is likely the most volatile?
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A fund with a P/E of 35, 25 holdings, and a 200% turnover rate. The last fund is taking on more price risk (its P/E is higher than the other funds' P/E) and per-issue risk than the others (its number of holdings is smaller), and it is trading more aggressively.
5.
Sector weightings in a fund tell you what?
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What industries your manager favors. If a fund has 50% of its portfolio in the technology sector, for example, half of its performance will be determined by the strength or weakness of that one sector.