Funds Intermediate: Fund Warning Signs

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1.
As a mutual fund family grows, its funds will continue to perform their original roles.
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False. Sometimes a fund changes its focus, for example from small-cap to mid-cap.
2.
A funds performance can be affected when new funds are added to the family it belongs to.
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True. Sometimes, a fund will lose its focus or change its role within the fund.
3.
Which of the following is not a good way to find out if your fund is on the verge of change?
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Keep an eye on your funds performance only. Fund performance isnt everything; it wont reflect a manager change, for example, or clue you in to changes that may be on the horizon.
4.
A manager change at a fund is _______.
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A warning sign that change may be on the way. Manager changes can lead to a drop-off in performance or a change in strategy, so theyre certainly warning signs. However, some types of funds handle manager changes better than others. As a result, a manager change isnt an automatic sell signal.
5.
A funds asset growth can lead to many problems. Which of the following is not typically one of them?
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Higher expenses. As assets grow, expenses may decline. But performance may stall, and the funds manager may have to change his or her strategy to accommodate all that money.