Telecommunications Mutual Funds

Telecommunications mutual funds invest in the stock of companies engaged in the development, manufacturing or sale of communications equipment or the development and sale of communications services. They may also invest in the stocks of companies providing ancillary products or services. Telecommunications includes traditional hardwired telephone service, cellular telephone and Internet service, paging services and fiber optic networks.

Over the past 10 years the telecommunications sector has consistently outperformed the general market but it has done so with a great deal of volatility. It also is a sector in a state of flux due to constantly changing technologies, business models and consumer demand, and changes in the composition of the companies in the industry attributable to consolidation through mergers, acquisitions and attrition, and the occasional entry of new players.

The Telecommunications sector is well represented in the general market and highly correlated to the S&P 500, thus adding a Telecommunications fund to your portfolio would lead to an over-weighting of this sector with little or no benefits from diversification.

This is another sector that should only be added to your portfolio if you are for some reason light in your participation in the general market or if you have some compelling personal reason to overweight this sector.

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