Sector Fund


DEFINITION of 'Sector Fund'

A stock mutual, exchange-traded or closed-end fund that invests solely in businesses that operate in a particular industry or sector of the economy. Because the holdings of this type of fund are in the same industry, there is an inherent lack of diversification associated with these funds.


These funds tend to increase substantially in price when there is an increased demand for the product or service offering provided by the businesses in which the funds invest. On the other hand, if there is a downturn in the specific sector in which a sector fund invests, the fund will often face heavy losses as a result of the lack of diversification in its holdings.

  1. Diversification

    A risk management technique that mixes a wide variety of investments ...
  2. Temporary New Account

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  3. Sector

    1. An area of the economy in which businesses share the same ...
  4. Sector Rotation

    The action of a mutual fund or portfolio manager shifting investment ...
  5. Fund Overlap

    A situation resulting from owning several mutual funds or exchange-traded ...
  6. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
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