Understanding Morningstar Style Box in Mutual Funds

Is it true or false that Jay's mutual fund holding 95% of small cap growth stocks will occupy the lower right corner of Morningstar style box?

False.

The Morningstar style box is a visual representation of a mutual fund's investment style. It is divided into nine squares, with the vertical axis representing the market capitalization (size) of the stocks and the horizontal axis representing the investment style (value, blend, or growth). In the case of Jay's mutual fund, if it holds 95% of small cap growth stocks, it means that the majority of the stocks in the fund are small cap growth stocks.

Small cap stocks are generally considered to have a market capitalization between $300 million and $2 billion. Growth stocks, on the other hand, are those expected to grow at an above-average rate compared to other stocks in the market.

To determine the position of a fund in the Morningstar style box, we need to consider the allocation of the fund's holdings across the size and style axes. Since Jay's fund holds small cap growth stocks, it would be positioned in the bottom left corner of the Morningstar style box, not the lower right corner. Therefore, the statement that Jay's fund will occupy the lower right corner of the Morningstar style box is false.