Sector Funds
These picks are good for plugging holes or tilting a portfolio toward a certain part of the market.
Name
|
Ticker
|
Category
|
Morningstar Analyst Rating
|
Morningstar Rating
|
|---|---|---|---|---|
| Health | ||||
| Large Value | ||||
| Health | ||||
| Real Estate | ||||
| Financial | ||||
| Technology | ||||
| Technology | ||||
| Health | ||||
| Real Estate | ||||
| Real Estate | ||||
| Equity Energy | ||||
| Real Estate | ||||
| Real Estate | ||||
| Real Estate | ||||
| Utilities | ||||
| Utilities | ||||
| Real Estate | ||||
| Global Real Estate | ||||
| Health | ||||
| Global Real Estate | ||||
| Technology | ||||
| Technology | ||||
| Global Real Estate | ||||
| Technology | ||||
| Equity Precious Metals | ||||
| Real Estate | ||||
| Financial | ||||
| Financial | ||||
| Global Real Estate | ||||
| Equity Energy | ||||
| Health | ||||
| Real Estate | ||||
| Financial | ||||
| Real Estate | ||||
| Global Real Estate | ||||
| Real Estate | ||||
| Communications | ||||
| Equity Energy | ||||
| Real Estate | ||||
| Real Estate | ||||
| Real Estate |
Most long-term strategic investors don’t need a dedicated sector fund. Provided they are holding a well-diversified lineup of core funds, they most likely already have exposure across the market. Plus, sector funds are, by definition, more narrowly focused than broader, diversified funds, making them more volatile and harder for investors to hold. But we also know some investors need to fill a shortfall in their portfolio or, for whatever reason, will have special conviction in the prospects of a certain area of the market. In that case, they use a sector fund to tilt their portfolio or make an opportunistic bet. To help those investors find best-of-breed choices, we screened for sector equity funds with Medalist ratings (Gold, Silver, or Bronze) that are open to new investment. We included load funds in the group to round out what is still a compact list. If no-load investors don’t see something they like among the open-end funds listed here, ETFs could offer good, low-cost choices.
List Criteria
Sector Equity Funds
This list includes domestic-equity funds that specialize in a particular sector of the market (based on their investment style over the past three years). Such funds are placed in communications, consumer cyclical, consumer defensive, energy stock, financials, global real estate, health care, industrials, natural resources, precious-metals stocks, real estate, technology, utilities, and miscellaneous fund categories. (Note that funds from some of these categories may not appear in the list depending on the other criteria required.)
Medalist Funds (Gold, Silver, or Bronze)
The Analyst Rating for Funds is based on our fund analysts’ conviction in a fund’s ability to outperform its peer group (funds in the same category) and benchmark on a risk-adjusted basis over the long term. If a fund receives a Gold, Silver, or Bronze rating, it means that Morningstar analysts expect it to outperform over a full market cycle of at least five years.
Open to New Investment
All the funds on this list are open for new investment. Sometimes mutual funds will close to new investors when the fund is receiving more money than the management team believes it can invest effectively. Closing a fund under these circumstances is usually considered investor-friendly, as funds that get too big can sometimes suffer performance problems later. Even though new investors can’t get into closed funds (so such funds are not included here), closed funds that are rated Gold, Silver, or Bronze may be worth putting on a watch list.
Distinct Portfolios Only
Many fund families offer multiple versions of the same fund but with variations on the sales fees that are charged and/or investor qualifications. Screening for “distinct portfolios only” removes all but one of these options to avoid having several share classes of the same offering cluttering the list. Morningstar normally designates the oldest share class as the distinct portfolio. In some cases, this share class may be for institutions (such as company retirement funds) or otherwise have a high investment minimum. In those cases, investors may want to consider an “investor” share class of the same fund, though the fund expenses may be higher for those share classes.