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Funds 503: Where and Why Asset Size Matters

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1.
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.
2.
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.
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.
How do you calculate a fund's asset size?
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Multiply the fund's net asset value by the number of shares outstanding. This is how you determine the asset size.
5.
Due to their sheer size, large funds tend to be the most threatened by asset growth.
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False. Because large-cap stocks account for the lion's share of the market's value, funds that focus on such names tend to be less affected by size than smaller-cap-focused funds.