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

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1.
In the Morningstar style box, all the small-cap funds are the same size.
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False. The funds vary dramatically in market capitalization; therefore, you should examine the size of each.
2.
Sector weightings in a fund tell you how much price risk a fund is taking on.
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False. Sector weightings tell you the industries your manager favors.
3.
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.
4.
A fund's number of holdings tells you how much per-issue risk a fund is taking on.
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True. 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.
5.
Price risk is the risk that securities will be overvalued by the market.
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True. Price risk can be illustrated with price/earnings and price/book ratios.