‘Sector’ Bets Offer Ways to Play Cyclicals

For mutual fund investors, buying into the cyclical stock surge is easy enough--if you can stand the volatility.

Several fund companies offer funds that specifically target industrial, commodity and/or other cyclical shares.

But note: Many of these are small funds in terms of assets. That can add to their volatility as money moves in and out. When the stocks themselves are volatile, that’s a recipe for big swings in the funds’ values--up and down.

Also note that you may have to pay sales charges to get into, and out of, some of these “sector” funds. Especially if you’re planning to trade, ask before you buy.

A few ideas:

* Fidelity Funds (phone: [800] 544-8888) has separate “Select” portfolios focused on such sectors as industrial materials, paper and forest products, chemicals and industrial equipment. The Fidelity Select Industrial Materials fund shot up 12.3% last week. By contrast, its total gain in the five years ended March 31 was a mere 25.6%.

* Oppenheimer Funds ([800] 525-7048) offers a Real Asset fund that focuses on commodity-related securities. It’s up more than 10% year-to-date.

* Several firms, including Fidelity, T. Rowe Price, Invesco, Prudential and Merrill Lynch offer funds that target such sectors as energy, precious metals and natural resources. Boosted by oil’s rebound, the average natural resources fund is up more than 13% this year, according to Lipper Inc.