As a finance expert, I often get asked whether mutual funds exist that cover all ten sectors of the economy. The short answer is yes, but the details matter. In this article, I’ll explore how such funds operate, their benefits, drawbacks, and whether they fit into a well-balanced portfolio.
Table of Contents
Understanding the Ten Sectors
The Global Industry Classification Standard (GICS) divides the U.S. stock market into ten sectors:
- Energy (e.g., ExxonMobil, Chevron)
- Materials (e.g., Dow Inc., Freeport-McMoRan)
- Industrials (e.g., Boeing, Honeywell)
- Consumer Discretionary (e.g., Amazon, Tesla)
- Consumer Staples (e.g., Procter & Gamble, Coca-Cola)
- Health Care (e.g., Pfizer, UnitedHealth Group)
- Financials (e.g., JPMorgan Chase, Bank of America)
- Information Technology (e.g., Apple, Microsoft)
- Communication Services (e.g., Meta, Alphabet)
- Utilities (e.g., NextEra Energy, Duke Energy)
A mutual fund holding all ten sectors is typically a broad-market index fund or a diversified actively managed fund.
How Do These Funds Work?
1. Broad-Market Index Funds
These funds track indices like the S&P 500 or Russell 3000, which inherently include all ten sectors. For example:
- Vanguard Total Stock Market Index Fund (VTSAX)
- Fidelity 500 Index Fund (FXAIX)
Since the S&P 500 represents about 80% of U.S. market capitalization, it naturally spans all sectors.
Sector Weights in the S&P 500 (2024)
| Sector | Weight (%) |
|---|---|
| Information Technology | 28.5% |
| Health Care | 13.2% |
| Financials | 12.1% |
| Consumer Discretionary | 10.7% |
| Communication Services | 8.9% |
| Industrials | 8.3% |
| Consumer Staples | 6.2% |
| Energy | 4.1% |
| Utilities | 2.8% |
| Materials | 2.4% |
Source: S&P Global (2024)
As you can see, technology dominates, while utilities and materials have smaller weights.
2. Actively Managed Diversified Funds
Some actively managed funds deliberately allocate across all sectors. Examples include:
- Fidelity Contrafund (FCNTX)
- T. Rowe Price Blue Chip Growth (TRBCX)
These funds adjust sector weights based on market conditions.
Mathematical Perspective: Diversification Benefits
Diversification reduces risk. The formula for portfolio variance is:
\sigma_p^2 = \sum_{i=1}^{n} w_i^2 \sigma_i^2 + \sum_{i=1}^{n} \sum_{j \neq i} w_i w_j \sigma_i \sigma_j \rho_{ij}Where:
- \sigma_p^2 = Portfolio variance
- w_i = Weight of asset i
- \sigma_i = Standard deviation of asset i
- \rho_{ij} = Correlation between assets i and j
Holding all ten sectors lowers unsystematic risk because sectors have different correlations. For example, utilities (\rho \approx 0.3 with tech) act as stabilizers when tech stocks fall.
Pros and Cons of All-Ten-Sector Funds
Pros
✔ Built-in diversification – Reduces single-sector risk.
✔ Lower volatility – Smooths out returns over time.
✔ Simplified investing – No need to balance sector ETFs individually.
Cons
✖ Overexposure to dominant sectors (e.g., tech at ~28%).
✖ Limited flexibility – Can’t overweight undervalued sectors.
✖ Potential mediocrity – May underperform concentrated funds in bull markets.
Case Study: Performance During Market Cycles
Let’s compare two scenarios:
- 2008 Financial Crisis
- Financials collapsed (-55%), but utilities (-22%) and consumer staples (-30%) fell less.
- A 10-sector fund lost ~37%, while a financials-only fund was decimated.
- 2020 COVID Crash & Recovery
- Tech (+48%) soared, while energy (-34%) crashed.
- A 10-sector fund returned ~18%, balancing winners and losers.
Should You Invest in These Funds?
For Passive Investors
If you want set-and-forget investing, a total market index fund is ideal.
For Active Investors
If you prefer tactical allocations, consider:
- A core 10-sector fund (e.g., 70% of portfolio).
- Satellite positions in favored sectors (e.g., 30% in tech or energy ETFs).
Final Thoughts
Mutual funds holding all ten sectors exist and are mostly index funds. They provide automatic diversification but may lack flexibility. Depending on your strategy, they can be either a foundation or a constraint.
