Choose wisely. There is only one correct answer to each question.
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1.
Why would redemption fees be good for a long-term investor in a sector fund?
They are eventually paid to investors who remain in the fund. Redemption fees are paid by investors who leave the fund early, and they are paid back into the fund.
2.
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.
3.
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.
4.
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.
5.
An investor with an already well-diversified portfolio might want to buy sector funds anyway. Which of the following would not be a reason for that investor to do so?
None of the above. All of these are reasons why an investor with a diversified portfolio might want to buy into sector funds anyway.
