Multiple choice

A sectoral fund is a

  1. low risk fund

  2. moderate risk fund

  3. high risk fund

  4. low-to-moderate risk fund
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Sectoral funds concentrate investments in a specific sector (e.g., technology, pharmaceuticals, banking). This lack of diversification across sectors makes them highly sensitive to sector-specific cycles, regulations, and disruptions. When the chosen sector underperforms, the entire fund suffers. There's no cushion from other sectors that might be performing well. Therefore, sectoral funds are classified as high-risk funds. Option C is correct.

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