Industrial Strength
Pump up portfolios with strong sector funds.
Sector investing can mean big bucks to an investor, but choosing
the right sector at the right time isn't easy.
Sector funds invest in companies within specific industries such
as electronics or biotechnology. But even though their portfolios
may hold dozens of stocks, they won't represent other
industries.
Such an investment can be both rewarding and devastating. In
1998 and 1999, for example, science and technology and
telecommunications funds were whipping the pants off other funds.
According to mutual fund tracker Lipper & Co., the average
science and technology fund was up nearly 135 percent in 1999, five
times the performance of the average U.S. equity fund that
year.
200
new funds were created by venture firms in 2001
with commitments totaling $55 billion (compared with 250 funds and
$70 billion commited in 2000)
SOURCE: National Venture Capital
Association
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By 2001, however, both types of sector funds tanked. Science and
technology were down more than 37 percent, and telecommunication
funds were off over 39 percent.
If you're going to be a player, be one with your eyes wide
open. For the average investor, that means asset allocations in
sector funds somewhere between 5 to 15 percent.
It's anybody's guess what sectors will be hot. But to
learn more about sector investing,check out Rydex Funds'
brochure "Exploring Sectors." To get a free copy, call
(800) 820-0888.
Dian Vujovich is an author, syndicated columnist and
publisher of mutual fund investing site www.allaboutfunds.com.