Asset managers such as Vanguard, State Street and BlackRock have made it easy to own individual sectors of the stock market through low-cost mutual and exchange-traded funds. But are they good investments?
The funds offer a simple way to diversify. For example, if your stock portfolio is heavy on shares of individual technology and energy companies, balancing those holdings with ETFs in sectors such as real estate and healthcare can provide a smoother ride. And a sector fund could make sense if you have a strong conviction that a particular area of the economy, such as finance, is underappreciated and will accelerate as investors recognize its true value.
