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Sector fund |
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Sector fundA mutual fund or unit trust which invests in a specific sector such as Chemicals or Telecommunication Services.Sector fundA 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.Sector fund Similar MatchesSectorSectorA group of listed companies operating in the same industry. In order to help investors compare the performance of similar companies, the share prices and financial ratios of these companies are reported together in newspapers.Example sectors:Entertainment and HotelsGeneral RetailersElectrical and Electronic equipmentBeveragesIn deciding whether a share price is good value or bad value, it helps to look at companies in the same sector. If Company A is on a P/E of 15 and Company B is on a P/E of 26, and they are both in toy retailing, you would certainly want to find out why before buying either. You would also want to compare the P/Es to the average P/E of the whole sector.If you plan to run a diversified portfolio in order to minimise risk, one way to do this is to make sure that you have no more than 2 shares in each sector. So a portfolio of 20 shares might span 10 sectors. The logic is that different sectors react to economic conditions in different ways, so a portfolio with shares across a number of different sectors maybe at less risk than one heavily concentrated in one sector.In February 2000 FTSE International launched a set of global sector indices, reflecting the shift by fund managers away from country-driven portfolio management towards sector-driven portfolio management. The indices cover:autosbanksbasic industriesenergyfinancialsgeneral industriesmediapharmaceuticaltechnologytelecommunicationsutilitiesFor each sector the indices include the most widely traded blue chip stocks, and their purpose is to give investors benchmarks against which to measure performance, and for which to create retail products such as exchange-traded funds. Sector allocationSector allocationInvestment of certain proportions of a portfolio in certain sectors. See: Industry allocation. Sector diversificationSector diversificationConstituting of a portfolio of stocks of companies in each major industry group. Intermarket sector spreadIntermarket sector spreadThe spread between the interest rate offered in two sectors of the bond market for issues of the same maturity. Intramarket sector spreadIntramarket sector spreadThe spread between two issues of the same maturity within a market sector. For instance, the difference in interest rates offered for five-year industrial corporate bonds and five-year utility corporate bonds. Further SuggestionsMarket sectorsSector rotation Public Sector Net Cash Requirement Sector Public Sector Borrowing Requirement Sector, Inc. Tax exempt sector |
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