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Funds 210: Your First Fund

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1.
Big fund families generally offer a range of funds to choose from.
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True. Though it's not guaranteed, as a general rule big fund families do offer a range of funds.
2.
Why might your first fund be one that favors large companies?
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Because these funds tend to be less volatile than funds owning smaller companies. Funds that own large companies, in general, may not be higher returning or cheaper, but they tend to be steadier investments than those owning smaller companies.
3.
Which could make the best first fund?
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One that owns 100 stocks from various sectors. For most people, one's first fund should be one that owns a significant number of stocks from a variety of industries.
4.
Why could it be a bad idea to buy a single-sector fund as your first fund?
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Such funds are volatile. Funds focusing on only one area of the market are not necessarily poor performers or more expensive, but they tend to be less stable than funds owning stocks from various industries.
5.
Because fund families tend to have a lot of funds in them, you are assured of finding plenty of diversity to choose from.
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False. Many fund families specialize in one type of fund, for example, large-growth funds. A big family isn't always a guarantee of diversity.