Specialized funds
Some mutual funds are extremely focused,
investing in a specific, sometimes narrowly defined group
of securities.
Sector
funds buy shares in a particular industry, such
as healthcare, electronics, or utilities, to meet the needs
of investors interested in a particular area of the economy.
The appeal of sector funds is that when they're doing well,
the returns can be outstanding. But while a sector fund
is more diversified than a single stock, there is nothing
in the fund portfolio to offset a downturn in its sector.
That makes them, as a group, extremely volatile.
Precious metal funds trade chiefly
in mining stocks though they may hold some gold bullion.
Some investors may buy these funds as protection against
turmoil in financial markets, but they can be extremely
volatile.
Socially
responsible funds,
sometimes known as
green
funds,
avoid investing in companies whose
products or practices might conflict with investors'
religious, political, environmental, or social beliefs.
To identify appropriate investments, each fund establishes
a set of criteria, called screens, to filter out those
that are unsuitable. For example, funds have been developed for religious groups and for investors with particular views on public policy issues, such as the environment or diversity.
|
