Imagine an Easter basket: a bunch of candies and colored eggs all collected and lumped together. It doesn’t have all the candy or all the eggs...but an extensive enough sample to give you a stomachache (just as any good Easter or Halloween should end).
A market basket works in a similar way. It presents a selected group of securities meant to stand in for a particular part of the market. If you want to see how the pharmaceutical sector is doing, you don't need to look at how shares of every drug maker are performing. You can pick a few bigwigs and important players.
This process underlies the idea behind market indexes. You don't need to look at every stock trading on Wall Street. Instead, look at how the S&P 500 is doing, a basket of the 500 most important publicly-traded firms.
The idea of a market basket comes up in economics as well. For instance, inflation measures, like the consumer price index (CPI), don't track the prices of every item anyone has ever bought. Instead, the government picks a representative sample...a basket of items chosen to provide a close approximation of the general inflation situation.
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Finance: What is a Sector Fund?5 Views
Finance allah shmoop What is a sect or fund All
right Well star wars and star trek captains are all
these barking about setting coordinates for sector for stat or
whatever they say That means urgent in the future right
We'll hear space here's sector four and it's Ah well
kind of a slice of space Ok now come back
to earth gently And as it applies to mutual funds
it's kind of the same notion that is A sector
comprises a particular discipline of investing Like think of it
like a slice of the s and p five hundred
Like one sector of the economy is banking Another is
tech Another is telecommunications And then there's oil and transport
And consumer durables in each of these areas has hundreds
of ways in which investors can invest in that particular
sector That is there are index funds that invest in
it Yeah Mutual funds hedge funds private equity funds Even
venture capital funds Each of whom has a particular discipline
or focus on lee in one sector More less so
why would you want to sector fund Well if you
believe that oil was about tohave an explosion in demand
the good kind of explosion Then you'd want to beam
or exposed to it financially at least to its upside
Then say you would technology which you feel has gotten
too expensive in the markets And its best days are
behind it It's A little like putting several of your
eggs into one particular basket because you really like that 00:01:30.519 --> [endTime] basket
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