Choose wisely. There is only one correct answer to each question.
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1.
Because so many fund investors buy high and sell low instead of the other way around, opportunists can make money by buying what others are selling.
True. Most investors have bad timing. An opportunist can use this to his or her advantage.
2.
Unpopular mutual fund categories are categories _______.
That don't have much money going into them. We use cash flows to determine a category's popularity. Unpopular categories are often poor performing categories, but not always.
3.
To help improve your odds when buying unpopular funds, _______.
Buy one fund from each of the three unpopular categories. Be sure to buy one fund from each category because not all unpopular categories thrive, nor do they thrive at the same time.
4.
What should you do about popular categories of funds that you own?
Consider cutting back on them. Popular categories tend to underperform unpopular categories. As such, think about taking some profits away from popular categories, but don't do wholesale selling. That practice may upset your asset allocation and lead to taxable events.
5.
If you want to try buying unpopular fund categories, you should put how much of your assets into them?
Just a sliver--no more than 5 percent. You should put no more than 5 percent of your assets into unpopular categories. This strategy is speculative. Yes, it has worked more often than not, but it's not meant to be a core part of your portfolio, and past performance cannot guarantee future results.
