Sector fund

Sector fund

A mutual fund that concentrates on a relatively narrow market sector. These funds can experience higher share price volatility than some diversified funds because sector funds are subject to common market forces specific to a given sector.

Sector Fund

A mutual fund or other fund that invests predominantly or exclusively in a single industry or sector. For example, a sector fund may invest only in energy companies, or, even more narrowly, only in natural gas companies. Sector funds perform well when their industries perform well, but they are risky because there is no attempt at diversification. A sector fund is also called a specialized market fund.

sector fund

An investment company that concentrates its holdings among securities or other assets sharing a common interest. For example, a sector fund may limit its holdings to foreign securities from a particular country or geographic region (for example, Korea Fund or Pacific Fund). Likewise, it may specialize in the securities of energy-related firms or in companies that produce precious metals. Sector funds permit investors to concentrate on a specific investment segment and yet diversify their investments among various issuers. Sector funds entail more risk but offer greater potential returns than funds that diversify their portfolios. Also called special-purpose fund, specialty fund.

Sector fund.

Sector mutual funds, also called specialty or specialized funds, concentrate their investments in a single segment of an industry, such as biotechnology, natural resources, utilities, or regional banks, for example.

Sector funds tend to be more volatile and erratic than more broadly diversified funds, and often dominate both the top and bottom of annual mutual fund performance charts. A sector that thrives in one economic climate may wither in another one.