Choose wisely. There is only one correct answer to each question.
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1.
Before cutting an underperforming fund, check its _______.
Three-year return against an appropriate index and its peers. Give funds a few years before cutting them loose, and be sure to compare them with appropriate benchmarks.
2.
In a mutual fund, style shift _______.
Sometimes indicates a change in strategy. Funds can change styles without a strategy change. A manager may buy small-cap stocks, for example, but hold onto them as they grow into large-cap names. Thus, a small-cap fund may shift into a mid-cap fund without a full-blown strategy change.
3.
Is it okay to sell a fund that you've lost money on?
Maybe. While buying on dips or holding on to break even are strategies that many investors employ, you don't have to, as long as you know that you'd never make such a volatile investment again. Learn from your mistakes.
4.
If your mutual fund is so volatile that it is giving you excessive stress, you can consider selling it.
True. Here, you might want to buy a fund that doesn't cause migraines or ulcers.
5.
As your financial goals change throughout life, what should happen with your mutual funds?
They should probably change too. At the very least, it's a good idea to make sure that they can meet your financial goals.
