A sector fund is a fund that invests in companies in a specific sector, or a specific type of business.
What is a sector fund?
Sector funds can invest in a general industry or a specific industry. For instance, technology is a general industry, and internet companies are a specific industry.
Because sector funds focus on only one industry, they are usually riskier than general stock funds.
That is not to say that sector funds have no function. Investors can use sector funds to fill gaps in their portfolios. Moreover, investors may want to back an industry in which they are confident.
For interested investors, Morningstar offers its own sector fund picks.