Choose wisely. There is only one correct answer to each question.
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1.
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.
2.
Rookie funds often cost more than established funds because they have more shareholders to pay dividends to.
False. They cost more because they have fewer shareholders. They don't benefit from an economy of scale.
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.
Which rookie fund should you consider avoiding?
One run by a manager with no mutual fund experience. With so many worthwhile funds to choose from, it's a big risk to take on an unknown quantity.
5.
What can you not count on when trying to get an idea of a rookie fund's risk level?
Historical risk measures. A new fund will have no (or perhaps many fewer) past years of risk measures to draw from. Therefore, you should gauge risk by how the portfolio is constructed currently.
