Funds Intermediate: Sector-Fund Investing

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1.
Which sector-fund strategy might you avoid?
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Buying sector funds that are performing exceptionally well. Investors tend to buy sector funds as their performance is peaking. As a result, the average sector-fund investor doesn't do too well.
2.
Why would redemption fees be good for a long-term investor in a sector fund?
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They are eventually paid to investors who remain in the fund. Redemption fees are paid by investors who leave the fund early, and they are paid back into the fund.
3.
If you're investing in a long-term trend, such as buying a health-care fund to play the Aging of America theme, which should you perhaps not do?
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Sell the fund if it loses money in a calendar year. To play a long-term theme, you need to be a long-term investor. If you believe in the idea, you should be buying when returns are down, or investing a little bit at a time (dollar-cost averaging) regardless of whether the fund's performance is up or down.
4.
Which statement is false?
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All investors need sector funds. You can build a very diverse portfolio without ever buying a sector fund. But you can use sector funds to diversify or to speculate.
5.
If you want to use sector funds to invest in a long-term trend, what strategy would be wise to use?
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Dollar cost averaging. This is an effective way to get into a trend slowly and carefully, especially if you are fairly new at it.