Choose wisely. There is only one correct answer to each question.
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1.
Why would you want to know how diversified a sector fund is?
The fund may be highly concentrated in certain subsectors; this will affect its performance. Some subsectors are quite volatile.
2.
Which sector-fund strategy might you avoid?
Buying sector funds that are performing exceptionally well. Investors tend to buy sector funds as their performance is peaking. As a result, the average sector-fund investor doesn't do too well.
3.
If you want to use sector funds to invest in a long-term trend, what strategy would be wise to use?
Dollar cost averaging. This is an effective way to get into a trend slowly and carefully, especially if you are fairly new at it.
4.
Which statement is false?
All investors need sector funds. You can build a very diverse portfolio without ever buying a sector fund. But you can use sector funds to diversify or to speculate.
5.
What costs are actually good for long-term sector-fund investors?
Redemption fees. Redemption fees discourage short-term traders from buying a sector fund and are paid back into the fund--in other words, they are paid back to investors who remain in the fund. And if you are a long-term investor, you'll never have to pay these fees.
