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Sector Funds, as the name suggests are those which invest in a particular sector. Sector funds grow potentially if the sector performs well, but they are more risky and volatile due to lack of diversification. They invest all the money in a particular sector, so all the returns are relied on the performance of sector. However, over the years sectors like IT, pharmaceutical and telecommunication have been prominent in the market. This is because they are consistently growing at double digit rates. Some investors also invest in particular sector because they fell that it may outperform the economy.
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