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Best-rated sector funds

- Alan Lavine and Gail Liberman

Are you among those who like to invest in oil and health care stocks for growth? Prefer income from a well- managed utility stock fund? Or, are you seeking a hedge against inflation, such as precious metals funds.

Here are some of the best-rated sector funds according to Morningstar Inc., Chicago. These funds carry four-star and five-star ratings. This means you get the best returns with the least amount of risk, compared with their peers.

But keep in mind that when you invest in a sector fund, it's typically a risky gambit. Do it only with money you can afford to lose.

Vanguard Energy Fund is the only natural resource fund that carries five-star rating by Morningstar. The fund buys and holds undervalued energy stocks for the long term. Its annual expenses are just .25 percent. There's no commission to invest in this fund. The fund yields about 2 percent. Over the past 10 years, it has grown at a 15.9 percent annual rate.

There are a number of five-star rated health care funds. They include BlackRock Health Sciences, Fidelity Select Medical Delivery, Fidelity Select Medial Equipment, Jenison Health Sciences and Vanguard Health Care.

Vanguard Precious Metals and Minerals Fund is the only precious metals fund that carries a five-star rating from Morningstar. Unfortunately, the fund is closed to new investors. Nevertheless, keep an eye on it and invest when it opens. Almost three-quarters of the fund's assets are in mid-size mining companies that are growing earnings at 18 percent annually.

Eaton Vance Utility Fund is the only fund in its class that carries a five-star Morningstar rating. The fund has performed well because it has invested in undervalued overseas utility stocks. The fund owns a lot of telecommunication stocks. The fund yields 2.5 percent. Over the past 10 years, it has grown at a 13.3 percent annual rate.

For more information, go to www.morningstar.com.


Spouses Gail Liberman and Alan Lavine are syndicated columnists. You can purchase Alan Lavine & Gail Liberman's latest book Quick Steps to Financial Stability (QUE Publishing 2006) online at www.moneycouple.com or at your local bookstore. E-mail them at MWliblav@aol.com.

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