Products & Their RisksQuestion 115 of 398
A sector fund that invests almost entirely in technology companies primarily exposes investors to:
a.Very low volatility and minimal risk
b.Interest rate risk only
c.Concentration risk, because performance depends heavily on one industry
d.No market risk due to diversification
Explanation
A sector (specialized) fund concentrates its holdings in a single industry, so investors face higher concentration risk: gains and losses hinge on the fortunes of that one sector rather than being spread across the broader market. This can boost returns when the sector thrives but magnifies losses when it declines.
Law Reference: Investment Company Act of 1940Practice all 398 questions free — no signup required.
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