Funds Intermediate: Sector-Fund Investing

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1.
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.
2.
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.
3.
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.
4.
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.
5.
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.