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| Course 406: Sector-Fund Investing | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Do You Need a Sector Fund? | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Not according to John Bogle, the founder of Vanguard funds and the granddaddy of index investing, who is firm: "You could go your entire life without ever owning a sector fund and probably never miss it." But Vanguard offers sector funds such as Vanguard Health Care VGHCX and Vanguard Energy VGENX. Bogle's point is simply that a well-diversified portfolio doesn't need sector funds. Let's take an example. If you owned Vanguard Total Stock Market Index, you'd have all of the major U.S. industries covered. The fund's portfolio would range from nearly 3.69% in utilities stocks to about 12% in health-care as of March 31, 2008. Your other significant exposure would be almost 17% in financials and 13.7% in industrial materials. That's pretty broad diversification, so you might not need or want to invest additionally in a sector fund—especially not one focused on bank stocks or health-care firms, or anything else significantly represented in the index. Next:
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| Learn how to invest like a pro with Morningstar’s Investment Workbooks (John Wiley & Sons, 2004, 2005), available at online bookstores. | ||
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