Consider the following statements about ‘Sector Funds’:

  1. Sector funds are an  Open-ended mutual funds
  2. Sector funds carry higher risk than equity mutual funds.

Which of the above statements is/are correct?

Answer: [B] Only 2

Sector funds are those mutual funds which invest solely in businesses that operate in a particular industry or sector of the economy. First statement is incorrect because sector funds are closed-end funds; and since they are closed ended funds, they have lack of diversification associated with them, and are more risky than diversified equity mutual funds.

This question is a part of GKToday's Integrated IAS General Studies Module