Choose wisely. There is only one correct answer to each question.
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1.
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.
2.
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.
3.
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.
4.
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.
5.
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.
