First Glance

The underline contains a comma; because the answers are short, glance down at the differences surrounding the comma. There's a split between "comma -ing" and a participle modifier (holding) and and. Also, one answer has a semicolon. Look for Structure, Meaning, and Modifier issues.

Issues

(1) Meaning: and

Compare the beginnings of each answer vertically. Answers (B) and (C) insert the conjunction and, turning the "comma -ing" into an independent clause.

In the original sentence, the fact that the mutual fund invests in so many different companies results in the fact that the fund holds only a very small share of each company. When answers (B) and (C) insert the word and, they change what used to be a modifier into a separate clause. Two independent clauses should be read as two independent pieces of information unless some word exists to create a cause-effect relationship.

For example: Yesterday, Xiying visited the shoe store and she bought some milk. Those are two separate pieces of information (She probably didn't buy milk at the shoe store!); the only connection is that she did both things yesterday.

The sentence should contain a cause-effect relationship. Eliminate answers (B) and (C).

(2) Pronoun: they
Meaning: it

Continue to compare the answers vertically. Answer (B) introduces a pronoun, it; answers (C), (D), and (E) contain the pronoun they. Which nouns do these pronouns refer to?

They is a plural pronoun, but in all three cases, the pronoun is meant to refer to the singular noun mutual fund. Eliminate answers (C), (D), and (E).

In answer (B), the pronoun it does not refer to the mutual fund, rather, it is a dummy pronoun, as in the sentence "It is raining outside." Is there anything wrong with that? yes. The second half of answer (B) never clearly indicates that it is talking about the mutual fund. Eliminate answer (B) for faulty meaning.

The Correct Answer

Correct answer (A) uses a participle modifier to convey a cause-effect meaning. It avoids the pronoun issues by not using a pronoun at all.

Hey

I have seen through my experience with GMAT SC that verbing modifiers (if modifying a clause) usually modify How, why and cause-effect part of it. But in this question nothing of that is visible, is my observation incorrect? and is there anything which I am not seeing?

Gagan

A mutual fund having billions of dollars in assets will typically invest that money in hundreds of companies, rarely holding more than one percent of the shares of any particular corporation.

here "rarely holding" modifies the action of "investing money" right?

here "rarely holding" modifies the action of "investing money" right?

Hey, I pretty much understand the question, however, I have a specific question, what rarely is modifying here? Can adverbs modify verb-ing in a sentence?

Hi,

Choice A correctly uses the comma + verb- ing modifier to modify the preceding clause. The comma + verb –ing modifier presents either additional information about the preceding clause or the result of that clause. Here it presents the result of the preceding clause. So, essentially it means that the author is trying to say that because a mutual fund with a lot of money generally invests in a number of companies, it rarely holds more than one percent of the shares of any particular company.

Now typically, the information given in the comma+ verb –ing modifier should make sense with the subject of the modified clause. Let’s check the same here:

A mutual fund (with a particular feature) rarely holds more than one percent of the shares of any particular corporation.

As you can see, the information given in the modifier (holding…corporation) does make sense with the subject of the modified clause (a mutual fund).

To understand the concept and various uses of comma + verb –ing modifier more, please refer to our in depth article on the subject here :

https://e-gmat.com/blogs/?p=3465

Hope the above discussion helps!

Regards,
Neeti.

Hi,
On the same topic of verbing modifier can you explain why this sentence would be incorrect?

"I typically invest in one company per year instead of multiple companies, holding 50% of my assets in cash "