What is a sector fund?
Sector funds invest in the stocks of one particular industry, like transportation, computers or health care. Sector funds are a great way to invest in a particular industry, without having to worry about picking particular stocks. Keep in mind that these funds are not diversified, and can experience wild swings in price. Frequently some sector fund will wind up being the best performing mutual fund for three months, then fall to the bottom in the following three months. Sector funds are best used as a small part of a diversified portfolio to increase exposure to an industry that has especially strong potential for growth.
