| Like most investments, specialized equity mutual | | | | Complimentary Asset Base |
| funds offer plenty of opportunity for investors to | | | | Most funds are rated based on their performance |
| further diversify their portfolios into more specific | | | | vis-a-vis the broader market or benchmark, such as |
| niche areas of the equity market. In many cases, | | | | the S&P 500. In such instances, many of the portfolio |
| these specialized funds offer tremendous growth and | | | | managers will carry a heavy weighting in securities |
| come at substantially higher risk. While these are two | | | | that are traded with the index and step "outside the |
| of the most common features, there are other | | | | box" only in some specific instances. This means the |
| benefits and drawbacks to specialized equity funds. | | | | investor's individual rate of return will often be linked |
| Access To Sector Specific Securities | | | | to the index or benchmark to a large degree. |
| For investors who are interested or bullish on specific | | | | Specialized funds allow investors to compliment their |
| market sectors, a specialized fund is quite possibly | | | | existing holdings by venturing off the beaten track. In |
| the best and most reasonable way to invest in those | | | | addition to their existing holdings, they can add |
| areas. For example, a real estate fund is considered a | | | | sectors and industries that would otherwise go |
| specialized fund because it invests in real estate | | | | unnoticed. Since many traditional growth funds will not |
| assets, most likely companies that are somehow | | | | invest in higher risk Chinese securities or Brazil |
| related to the real estate industry (as opposed to | | | | retailers, investing in a fund that does allows the |
| actual real estate holdings like buildings; however, | | | | investor to cast a wider net across sectors and |
| many of these securities held in some of these funds | | | | markets and enjoy potential returns from such |
| might actually hold buildings). For invstors who are | | | | specialized investments. |
| bullish on specific industries, such funds make the | | | | The risks are also heightened when investing this |
| best sense because the portfolio manager will aim to | | | | way because if such markets or sectors |
| purchase enough assets to diversify the risk across | | | | underperform, they typically do so at a sharper pace |
| multiple holdings. | | | | domestic markets or investments. |
| The risks to holding such specific assets lies in the | | | | Despite the benefits and drawbacks outlined above, |
| fact that diversification is limited to that specific | | | | investors are always cautioned about investing in |
| sector. A Gold fund for example might invest in | | | | specialized funds. This is purely the result of a risk |
| several securities that are related to the gold | | | | management approach to investing; limiting how much |
| industry, but if the gold industry as a whole suffers | | | | is invested outside of a traditional portfolio allows for |
| due to tighter regulations, low prices, higher costs, | | | | just enough opportunity to exceed |
| etc., then the specialized fund will also suffer, | | | | traditional-portfolio gains while ensuring that the core |
| regardless of what kind of performance the broader | | | | portfolio will not be decimated in the event of a |
| market or other funds see. | | | | substantial market correction. |