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Funds 410: Buying the Unloved

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1.
If you want to try buying unpopular fund categories, you should put how much of your assets into them?
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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.
2.
What should you do about popular categories of funds that you own?
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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.
3.
To help improve your odds when buying unpopular funds, _______.
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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.
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.
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True. Most investors have bad timing. An opportunist can use this to his or her advantage.
5.
Morningstar's unpopular-funds strategy can produce positive results because _______.
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Fund investors often have lousy timing. Because fund investors buy high and sell low (rather than the other way around), opportunists have the potential to make money by buying what others are selling.