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Sector Funds
Sector funds buy stocks in a particular industry or segment of the market. There are sector funds for just about every segment of the market - financial, technology, Internet, healthcare. Since sectors can be more volatile than the overall market, sector funds can offer investors greater opportunity for price appreciation. However, they can also be more risky, and they don't provide investors with adequate diversification. They do provide diversification within an industry, but in order for an investor to properly diversify an entire portfolio, he would have to buy a bunch of sector funds. This could prove to be a beneficial strategy, if the investor has the time and money to research, track, and buy funds in many sectors.


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