sector fund

Sector Fund

An investment fund that makes investments solely in businesses that operate in a particular industry or sector of the economy.

Notes:

Because the holdings of this type of fund are in the same industry, there is an inherent lack of diversification by sector associated with these funds. These funds tend to increase substantially in price when there is an increased demand for the product or service offering provided by the businesses in which the funds invest. On the other hand, if there is a downturn in the specific sector in which a sector fund invests, the fund will face heavy losses due to the lack of diversification in its holdings.

See also: Diversification, Mutual Fund, Sector, Sector Rotation

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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.

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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.