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3 Great Specialized Funds

3 Great Specialized Funds

Russel Kinnel: Sector funds are good way to tap a team of specialists to really make the most out of a sector. They're also good for plugging holes in your portfolio. But use them in moderation—one or two is plenty. If you have most of your money in specialty funds, it's kind of like building a house out of twigs instead of two-by-fours. So, with that caveat aside, let's look at three good sector funds. 3 Great Specialized Funds These specialized funds earn a Morningstar Analyst Rating of Bronze, Silver, or Gold.

  1. Fidelity Select Health Care FSPHX
  2. Cohen & Steers Realty CSRSX
  3. T. Rowe Price Global Tech PRGTX

Fidelity Select Health Care FSPHX is run by Ed Yoon and a team of experts with MDs and PHDs. Although the fund invests in some cutting-edge biotech and device names, it actually is bullish on less-exciting providers like UnitedHealth Group UNH. The fund has lost less than its peers as a result this year, but we think it also has good long-term prospects for future rallies.

If you're feeling a little contrarian, maybe consider a real estate fund. The category is down almost 30% this year because it's very sensitive to interest rates, so when interest rates spike, REITs get crushed. One of the better choices there is Cohen & Steers Realty CSRSX; it's a straightforward play on REITs. Run by a seasoned team, the strategy is to blend top-down and bottom-up work to build a solid portfolio. Finally, one of our favorite tech funds is Silver-rated T. Rowe Price Global Tech PRGTX. Alan Tu looks to fill the portfolio with T. Rowe's highest-conviction long-term tech names. At the end of June that included names like ServiceNow NOW, HubSpot HUBS, Tesla TSLA, and Nvidia NVDA. Needless to say this is a volatile fund that will work best if you have a time horizon of more than 10 years. Watch 3 Great Small-Value Funds for more from Russel Kinnel.

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About the Author

Russel Kinnel

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Russel Kinnel is director of ratings, manager research, for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He heads the North American Medalist Rating Committee, which vets the Morningstar Medalist Rating™ for funds. He is the editor of Morningstar FundInvestor, a monthly newsletter, and has published a number of prominent studies of the fund industry covering subjects such as manager investment, expenses, and investor returns.

Since joining Morningstar in 1994, Kinnel has analyzed virtually every type of fund and has covered the most prominent fund families, including Fidelity, T. Rowe Price, and Vanguard. He has led studies on the predictive power of fund data and helped develop the Morningstar Rating for funds and the Morningstar Style Box methodology. He was co-author of the company's first book, Morningstar Guide to Mutual Funds: 5-Star Strategies for Success (Wiley, 2003), and was author of the book Fund Spy: Morningstar's Inside Secrets to Selecting Mutual Funds That Outperform, published in 2009.

Kinnel holds a bachelor's degree in economics and journalism from the University of Wisconsin.

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