What do you think of sector funds? I'm not much in favor, but wonder if there are more advantages than I see.

thinker70 answered 11 months ago …

The key to success as an investor is similar to Waynes Gretzkys comment in respect to being a good hockey player who ANTICIPATES the play by skating to where the puck is GOING TO BE NEXT, not where it is now.

The market is forward looking to a degree but an investor to be successful has to get there before the herd! In other words read widely, have good basic common sense to relate facts and trends to anticipate what the market is likely to do in the future.

This is where ETF's are miles ahead of mutual funds because of lower management fees, greater flexibility, ease of getting in and out etc. You still have to choose wisely, but they allow you to narrow your target!

For example; I just read a piece by Jay Taylor who made the point that the DEMAND for gold coins and ingots has been red hot lately, while production from mines has been DECLINING! Add to that a serious decline in PRODUCTION costs with the drop in the oil price, plus base metals prices being so low some mines are closing, (temporarily until prices improve) resulting in EXPERIENCED geologists and minors etc. looking for jobs.

Combine all those facts and what do you have, a good case for gold and silver miners future prospects? The choice then becomes 1) do you buy a couple leading gold miners like Barrick, Newmont, Kinross, Yamana etc. or 2) do you bet on emerging producers whose reserves have not YET been recognized by the mainstream and so are grossly undervalued, or 3) do you simply buy an ETF like the Market Vectors Gold Miners Trust that invests in a wide range of producers? I use this example to illustrate the points I nade initially, only the individual investor can make the choice most appropriate for his personal portfolio allocation!