Sector Mutual Fund Investing
As an investor, if you are going to pay an investment advisor either a fee or a commission to manage your retirement or brokerage portfolio, don't waste your time and money by allowing your paid advisor to invest in diversified mutual funds. When it comes to stock investing, diversified stock mutual funds are funds that invest in stocks representing a variety of sectors of the economy, the logic being that when one sector is lagging, another sector will flourish. This is a flawed logic. For most investors, you want to hire and retain an investment manager that follows a win-win investment strategy, not a win-lose strategy.
Fact: A competent money manager would have you invested only in sectors of the economy (and global regions) that are doing well, while eschewing the weak sectors and global sectors. Which begs the question: if you are going to invest in a win-lose diversified stock mutual fund, why pay a fee or commission for diversified mutual fund advice when you yourself can invest in a diversified, a no-load Standard and Poor 500 index fund and generally get the same results?
Another advantage of competent sector mutual fund investing is that the performance of sector funds can generate roughly 75% of the gains of individual stocks but with only 50% of the risk. Hence, one of the best ways to invest in sector mutual funds is with the Fidelity no-load family of funds. Also, electronically traded mutual funds (ETFs), available through any discount brokerage firm, now offers hundreds of ways to invest in sector funds - and can be bought and sold like stocks.
The same goes for international investing. Why invest in a internationally-diversified stock mutual fund (which may include owning stock of companies from all global regions) when the regions of Asia, Eastern Europe and Latin America are the fastest growing consumer economies? If an investor wants to invest in the lower risk international regions, then stick to Europe and Japan. Hence, your best discount brokerage firms offer dozens of ETFs that are specific to the fastest growing global regions or countries.
In the end, lazy investment advisors and individual investors invest your money in diversified mutual funds because they don’t want to do the work necessary to identify the best performing sectors of the U.S. economy and the fastest growing regions or countries of the world. When it comes to paying for investment advice, diversification is an outdated investment concept. And when paying for investment advice, you want to go for a win-win investment strategy.
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