All Courses > Funds > 400
Funds 411: Buying Rookie Funds

Test your knowledge

Choose wisely. There is only one correct answer to each question.

0%
Keep studying!
Review your answers below to learn more.
1.
A wise strategy for many investors regarding rookie funds is to use them _______.
Choose wisely. There is only one correct answer.
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.
2.
Because they are new on the scene, rookie funds are likely to carry lower expense ratios than older funds.
Choose wisely. There is only one correct answer.
False. They are likely to carry higher expense ratios because they have fewer shareholders, compared to established funds, to bear the costs.
3.
For most investors, rookie funds should _______.
Choose wisely. There is only one correct answer.
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.
4.
Why do rookie funds often cost more than established funds?
Choose wisely. There is only one correct answer.
Because rookie funds generally have fewer shareholders to cover costs. As funds grow, they begin to enjoy economies of scale; in other words, there are more shareholders to cover costs.
5.
What can you not count on when trying to get an idea of a rookie fund's risk level?
Choose wisely. There is only one correct answer.
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.