Funds Intermediate: Sector-Fund Investing

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1.
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.
2.
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.
3.
What costs are actually good for long-term sector-fund investors?
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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.
4.
A well-diversified portfolio doesn't need sector funds.
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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.
5.
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.