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Funds 405: Sector-Fund Investing

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1.
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.
2.
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.
3.
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.
4.
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?
Choose wisely. There is only one correct answer.
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.
5.
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.