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Market Update

Why Sector Funds Are a Bad Bet

These funds sound good on paper but can be difficult to use effectively.

Sector funds--which focus on stocks issued by companies in a specific corner of the economy--have become increasingly popular. These funds attracted about $97.6 billion in net new dollars during 2021. In addition, fund companies have rolled out about 100 newly minted sector-focused funds and exchange-traded funds over the past 12 months. These funds often appeal to investors looking to take advantage of emerging economic trends, such as growth in technology, infrastructure, and healthcare.