Sullivan, microcap manager with no particular expertise in biotech. But the history of previous hot new technologies and the funds rushed to market to take advantage of them offers some sobering lessons for anyone tempted to jump on the latest investing bandwagon. Ask the AnalystNanotech and the pitfalls of specialty funds advertisement Beware of investing in the hot new thing. Of course, its possible that one or two of these nanotech names will be hugely successful and grow to megacap size, as eBayEBAY, news, msgs did among biotech stocks. Remember the Internet fund craze?

Such microcap stocks are very risky to own under any circumstances, and of these have stillunproven business models. Its possible that nanotechnology could turn out to be the greatest thing since sliced bread, as its fervent promoters are hoping. All of them eventually came crashing down to earth. To answer the original question No, there are no mutual funds specializing in nanotech stocks, at least not yet, but it might just be matter of time. Nanotech stocks add another layer of risk, because of them are very small.

Such microcap stocks are very risky to own under any circumstances, and of these have stillunproven business models. It lost nearly 80 of its value between and and of them shouldnt have existed in the first place. The few survivors, such as Munder NetNet MNNAX and Jacob Internet JAMFX, have been wildly volatile and destroyed lots of shareholder value. Whats more, the diversification benefits normally found in mutual funds are largely negated in such offerings.

For example, Harris & Harris gained 369 despite having virtually no revenue, let alone profits, and of the other stocks in the index have lost ground so far this year, by more than 20, and the index itself is down 25 since its launch. think its good thing for investors that there are no nanotech mutual funds because such funds would be the height of gimmickry. But just because something is cool and seems like the next big thing doesnt mean its necessarily good investment.

If any do come along eventually, would treat them with extreme caution. Trendy mutual funds tend to appear frequently right near the peak of bubble. This has, of course, caught the attention of the market in fact, this is the second question about nanotech funds that weve received in the past couple of months. Internet funds sprouted like weeds between and and its adviser resigned in early in favor of Robert J. Both the Munder and Jacob funds are Analyst Pans in Morningstars technology category.

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