If you're looking at "sector" mutual funds -- those with portfolios restricted to investments in specific industries -- be ready to discipline yourself accordingly, a leading financial observer says.
Peter Brewster, editor of the Canadian Mutual Fund Adviser newsletter, says the funds, normally specializing in science and technology or financial services and telecommunications, carry a risk somewhere between individual stocks and diversified stock funds but are riskier than more broadly diversified funds.
Most sector funds tend to underachieve but also have short bursts of energy and using them profitably requires a short-term strategy, Brewster says. Some guidelines for sector-find investing include:
-- Have patience. Avoid buying immediately into a sector that's on a roll. Funds low in the listing offer a greatly reduced risk.
--Watch out for charges. No-commission agents or no-load funds are a better bet. Paying percentage points drops the profit margin considerably.
--If you're wary of how far a sector fund will rise, take your profit when you feel the time is ripe.
