Funds Intermediate: Sector-Fund Investing

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 well-diversified portfolio doesn't need sector funds.
Choose wisely. There is only one correct answer.
True. A well-diversified portfolio likely covers several different sectors already. But although it doesn't need them, you can still use sector funds for additional diversification.
2.
Why would you want to know how diversified a sector fund is?
Choose wisely. There is only one correct answer.
The fund may be highly concentrated in certain subsectors; this will affect its performance. Some subsectors are quite volatile.
3.
Which sector-fund strategy might you avoid?
Choose wisely. There is only one correct answer.
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.
4.
What costs are actually good for long-term sector-fund investors?
Choose wisely. There is only one correct answer.
Redemption fees. Redemption fees discourage short-term traders from buying a sector fund and are paid back into the fund--in other words, they are paid back to investors who remain in the fund. And if you are a long-term investor, you'll never have to pay these fees.
5.
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?
Choose wisely. There is only one correct answer.
None of the above. All of these are reasons why an investor with a diversified portfolio might want to buy into sector funds anyway.