Susan Dziubinski: Hi, I'm Susan Dziubinski for Morningstar. We talk a lot about building a portfolio of sensible core funds that can help you reach your goals, but sometimes you may want to take a bit of a gamble on a particular sector at the outskirts of your portfolio. Here are three funds that may not be good core holdings, but they are among the best sector funds around.
Thomas Lancereau: Gold-rated Vanguard Health Care is one of the best in its category. Its subadvisor, Wellington Asset Management, has a stable and experienced team dedicated to this sector including lead manager Jean Hynes, who has worked with the team for almost three decades. The portfolio is broadly diversified across the different healthcare industries such as pharma, biotech, and medical-devices companies. Exposure to foreign stocks is higher than the normal with around 25% of assets in non-U.S. stocks. This fund is the biggest one in the Morningstar health category. It has more than $40 billion in assets under management, but it's not a challenge as it mostly invests in large caps. The fund has delivered for investors. It's outperforming index benchmark over multiple time periods as well as peers on a risk-adjusted basis. Volatility is lower than peers as the category includes biotech-only firms. Plus, fees are amongst the lowest in the category, which makes this strategy even more appealing.
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Nick Watson does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.