Sector fund

A sector fund is any fund that invests only on a certain sector and nothing else. Talking about diversification, sector funds will be heavilly hit once the sector it invests in is not doing well.

However, due to its specialty on a single sector, this fund typically generates higher returns than a widely followed benchmark. For instance, if the sector solely invests in technology and the sector is performing relatively well, then the fund experiences greater returns than most funds.

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