Introduction to Sector Funds

If you are following a piece of the market, you need to track what that piece is doing relative to a larger related group—its relative strength—as well as its price. So compare a stock with a group, a group with a sector, and a sector with the broad market. Is it stronger or weaker than the larger group?

In this sort of analysis, market sectors play a critical role. But because this is an evolving area, some background information is needed to understand where sectors came from and where they are headed.

The first sector work was done in the early 1960s by Ken Safian and the late Ken Smilen, then at Purcell Graham, who came up with what they called the dual-market principle. They ...

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