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Funds 501: Avoiding Portfolio Overlap

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1.
An online tool can help you find overlap in your portfolio.
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True. Firms such as Morningstar have special tools on their Websites to help you analyze your portfolio for overlap.
2.
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?
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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.
3.
The Morningstar Style Box uses _______.
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A fund's current portfolio. In order to gauge overlap, the box must use the most recent holdings.
4.
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.
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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.
5.
What do boutique funds do?
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Specialize in one thing. A boutique fund will specialize in one thing, whether it is an investment objective, a part of the world, or some other aspect of investing.