Funds Intermediate: Sector-Fund Investing

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1.
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.
2.
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.
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.
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.
5.
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.