|
|
|
| Home > Education and Planning > Investor Education |
|
| Spotlight on SECTOR Funds |
|
|
Location. Location. Location. There is a school of investing thought that says it is ultimately not the type of "house" you buy, but rather the "neighborhood" it is located in that determines how successful your investment may be. Simply put, the places, or "sectors," in which you invest may make a significant impact in your ability to meet your long-term financial goals.
Sector Funds Defined
What exactly is a sector fund? Think: concentrated exposure to a specific sector of the economy or industry. There are sector funds for financial services, technology, health care, energy and utilities, for example. A narrow investment focus is appealing to many investors for numerous reasons, including the ability to easily understand "what you are buying." In addition to a concentrated focus on equities in a specific area, sector funds also tend to concentrate their investments in fewer stocks within the industry than a typical common stock fund would.
Is a Sector Fund Right for You?
If you have a particular interest in or knowledge of a specific sector and if you and your advisor feel that an investment in a sector fund would enhance your potential for long-term gains, you should investigate further. Certainly, sector funds are not for everyone -- investment risk is greater, primarily because of the concentration in a single industry. Compared to the broad market, an individual sector may be more heavily affected by changes in the economic climate or by moves in a particular "dominant" stock. In addition, industries in sector funds frequently experience lengthy economic cycles. Before adding a sector fund to your portfolio, you should assess several key criteria that relate to you:
- Are you already well diversified among your current fund holdings?
- Do sector funds and their sometimes-volatile nature fit your personal risk tolerance?
- Are you willing to hold a sector fund for the long run and avoid the urge to switch frequently from one sector to another?
- Do you have realistic return expectations from your sector fund?
- Are you willing to invest some time and effort to keep up with industry developments in your chosen sector?
Set Realistic Expectations
There is no way to accurately predict what a particular sector fund might do. And, of course, past performance is no guarantee of future results. But doing a little homework on the sector you're interested in may at least help you set realistic expectations for your investment. Here are some questions to consider:
If the industry has been in an upswing for quite a while, are you buying in too late?
Is there recently-passed or expected legislation that may affect the sector?
Does the sector have international exposure? (International investing adds further diversification and potential for long-term gain to your portfolio.)
How many individual stocks does the sector fund hold?
What breadth and depth of experience in the sector does the fund manager have?
Finally, keep in mind that all funds' performances will fluctuate -- especially in the short-term. The objective, of course, is to enhance your long-term returns. A sector fund may provide you an additional way to do just that.
Investors should consider a fund's investment objectives, risks, charges and expenses carefully before investing. For this and other information about The 787 Fund and AXA Enterprise Funds, download a prospectus, ask your financial advisor for a copy, or call 1-800-432-4320. Please read a prospectus carefully before you invest or send money.
Sector funds seek higher than average growth by concentrating in specific industries and typically possess higher risk associated with a less diversified portfolio.
|
|
|
|
Privacy Policy 
