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.
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.
3.
An investor with an already well-diversified portfolio might want to buy sector funds anyway. Which of the following would not be a reason for that investor to do so?
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None of the above. All of these are reasons why an investor with a diversified portfolio might want to buy into sector funds anyway.
4.
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.
5.
Why would you want to know how diversified a sector fund is?
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The fund may be highly concentrated in certain subsectors; this will affect its performance. Some subsectors are quite volatile.