Sector mutual funds are one way of investing in market niches. Sector funds enable you to pinpoint your investments in areas such as health care, biotech, and technology (or financials, after the Fed rate cut).
ETFs are another, but have some additional risks. The common cautionary note about sector funds is they're just that: an investment concentrated in one area, where all the companies share similar characteristics and react to macroeconomic or industry events in the same way.
Thus, sector funds offer only limited diversification - within a group but a group where all the stocks will move in the same direction, for the same reason.
Sector funds offer the advantage of professional management. The portfolio manager should be able to pick the best stocks in the sector. They are a sound way for an investor to participate in sectors where they wish to invest a small portion of their assets but don't want the risk of having to select a single stock - avoiding the needle in the haystack theory.
The hidden risk of sector funds, or more than meets the eye, is that mutual funds in the same sector may have very different investment philosophies and/or definitions of what comprises suitable investments. To illustrate this point, let's look at two top ten funds, according to Morningstar, from the Utility and the Natural Resource sectors.
The JHT Utilities Trust (JEUTX) and the Fidelity Select Utilities Growth fund (FSUTX) are both top ten ranked utility funds but they're different. JHT defines utilities to include telephone companies, such as A&T, and has a foreign stock among its ten largest holdings. The Fidelity fund is focused on power generation and delivery companies.
The two funds only have three stocks in common among their ten largest holdings. The same is true for the Blackrock Global Resources fund (SGLSX) and the Vanguard Energy fund (VGELX).
Blackrock's top holdings are focused on exploration, drilling and coal. Vanguard owns more of the traditional large integrated oil companies. They have no stocks in common among their top ten holdings.
Neither strategy in our examples of top performing utility and natural resource funds is right or wrong, they're just different. That's the point.
Before investing in any sector fund (or any mutual fund), review its stated investment objectives and its top holdings. Then you'll really understand the nature of the fund and if it's the right fund for you.
Sector funds have their place in your portfolio, not as core holdings, but as a diversified way of making targeted investments in selected niches. Lastly, don't forget sector funds carry more risk than broadly diversified (investing across many sectors) mutual funds.
Almost all DUI investigations include having a California DUI suspect perform various balance and coordination tests. These tests are referred to as field sobriety tests or FST's. The theory behind these tests is that they test a person's ability to divide attention. Driving is portrayed as a divided attention task. One has to both operate the automobile and also pay attention to other cars, pedestrians, and traffic controls on the road.
There are several FST's. The most common are the horizontal gaze nystagmus, walk and turn, one leg stand, Rhomberg balance, finger to nose, alphabet, and number count. Only three of these tests, the horizontal gaze nystagmus, walk and turn, and one leg stand are recognized by the National Highway Traffic and Safety Administration (NHSTA) as having a statistical validity. These three tests are called Standardized Field Sobriety Tests (SFST's)
The horizontal gaze nystagmus test consists of the arresting officer asking the DUI suspect to keep their head still and follow a stimulus such as a pen or finger while the officer moves it in front of their face. The officer is looking to see if the eyeballs jerk involuntarily (nystagmus). This is the SFST that has the greatest aura of scientific validity. However, in reality, it is junk science. There are some people who have nystagmus that is natural or caused by a medical condition. The arresting officer can cause nystagmus by moving the stimulus too fast, holding it out too long, or holding it too close to the suspect's face. Also, jerking motions by the arresting officer can cause nystagmus. As a result, this test is rarely performed correctly and properly by arresting officers.
The walk and turn is a deceptively simple test, but in reality it is complex to administer. Giving the proper instructions and demonstrating the test take practice and experience. Failure to start the person off on the correct foot can sabotage the entire test and set the person up for failure. Minor sins like raising arms more than six inches for balance are counted against the test subject. There are many places to make mistakes. Sober people make many mistakes on this test given the complexity of the instructions.
The one leg stand is the easiest test to administer, but for some suspects, the hardest to perform. Being asked to place your hands at your sides and balance on one foot while keeping the opposite leg perfectly strait and look down at your feet can be hard to do by the side of the road under the stress of a law enforcement detention at 3:00 in the morning. I had one trial where I asked the officer to demonstrate this test. The officer struggled, shaking and hopping before the jury. He failed the test, but said it was due to being nervous in court. Why did the officer fail to give my client the same excuse?
NHSTA's manual claims that if the three SFST's are performed correctly and scored correctly, than they can have an accuracy rate of 91% for predicting a BAC of .08 or above. These studies are of questionable validity because they were all conducted by law enforcement agencies under unrealistic control, sample and verification conditions. It is important to emphasize that the 91% rate would only apply in a perfect investigation where the tests were done correctly. In the vast majority of cases, can find the defects to help undermine the value of this evidence in the prosecution's case.
There are common misunderstandings of the role of FST's. Many people believe that FST's can show impairment or prove that a suspect has a certain blood alcohol level. The proper role of the FST's as testified to by the creator of the FST's is to help the arresting officer decide to arrest the DUI suspect and take the DUI suspect to have a chemical test performed. That is really the only purpose for FST's. Nevertheless, many prosecutors and others continue to insist that the test performance on its own is sufficient for conviction.
It critical for the DUI defendant to obtain a who understands the proper role and weaknesses of field sobriety tests and can effectively communicate these issues to juries and judges.
Both Bill Byrnes & Kenton Koszdin are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Bill Byrnes has sinced written about articles on various topics from Financial Planning, Currency Trading and Financial Planning. Bill Byrnes is co-founder of MUTUALdecision, , providing investors with data on the top mutual funds, and author of the MUTUALdecision Blog. He's been. Bill Byrnes's top article generates over 6600 views. to your Favourites.
Kenton Koszdin has sinced written about articles on various topics from Business and Finance, Legal Matters. Author Bio: Kenton Koszdin of Los Angeles County,. Kenton Koszdin's top article generates over 6600 views. to your Favourites.