Choose wisely. There is only one correct answer to each question.
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1.
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.
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.
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.
A well-diversified portfolio doesn't need sector funds.
True. A well-diversified portfolio likely covers several different sectors already. But although it doesn't need them, you can still use sector funds for additional diversification.
