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1.
Because they are new on the scene, rookie funds are likely to carry lower expense ratios than older funds.
False. They are likely to carry higher expense ratios because they have fewer shareholders, compared to established funds, to bear the costs.
2.
For most investors, rookie funds should _______.
Be held in small quantities, if at all. Consider starting out with a small position in a rookie fund, and if the fund lives up to your expectations, you can always add to it over time.
3.
A wise strategy for many investors regarding rookie funds is to use them _______.
As the fringe of their portfolio. Given their risk levels and their lack of performance history, it may be wise to treat these new funds cautiously, as a minority position in one's portfolio.
4.
Why is it important to examine a rookie fund's portfolio?
Both of the above. Without past return and risk statistics to guide your decision, the portfolio is the best indication of a fund's potential.
5.
Why should you favor managers who invest in their own funds?
Their interests are aligned with yours. Managers who also own the funds they run are shareholders, too, which means they're more likely to keep costs lower and minimize taxable distributions.
