If they had picked a good, conservative fund and just hung in there, these investors would have gained back all their money and more. In fact, when the fund share price was down, it was a buying opportunity to take advantage of dollar cost averaging.

If your strategy is to jump to another fund every time you have a bad year, then you are buying high and selling low - great strategy!

However, if your fund really is a dud and you probably bought it for the wrong reasons, sell it fast. Don't kid yourself that you are diversified if your money is in sector funds. This is a good way to maximize your losses when an industry suddenly hits hard times.

But if you do have some sector fund investments, don't bury your head in the sand. Except with an index fund, a buy and hold strategy is not buy and forget about it. You need to pay attention.

Mutual funds should be a long term investment. Buy a good one based on the advice you find here in this book, then add money to it on a regular basis, and don't watch it day to day or even month to month. A properly chosen fund will not disappoint you. It will make you rich.

Here are some examples of what happens when you jump to the “Hot Fund”
 

I could give you many, many more examples.
 

Other Stock Market Basics Topics:

1. Mutual Fund Advantages
2. History of Mutual Funds
3. NAV
4. Dollar Cost Averaging
5. General advice about choosing a fund
6. Mutual Fund Ratings
7. Evaluating Mutual Fund Investment Risk
8. Mutual Fund Share Classes
9. Mutual Fund Fees
10. The Mutual Fund Prospectus
11. How important is the manager's length of experience?
12. Why is the prospectus hard to understand?
13. Mutual Fund Annual Report
14. Comparing your fund to the competition
15. Comparing funds on an after-tax basis
16. Average Return on Investment
17. How Not to Pick a Mutual Fund
18. Cashing in Your Fund
19. When to Sell Your Fund
20. Mutual Funds and Asset Allocation
21. When to get started with a mutual fund
22. Types of Mutual Funds
23. Value Stock Funds
24. Growth Stock Funds
25. Small and Micro-cap Stocks
26. Mid Cap
27. Large Cap Companies
28. Income Stock Funds
29. Mutual Fund Index
30. Enhanced Index Funds
31. Sector Mutual Funds
32. Stock Market Sectors
33. Defensive Stocks
34. International Funds
35. Real Estate Mutual Funds
36. Socially Responsible Funds
37. Balanced Funds
38. Tax-Efficient Funds
39. Bond Convertible Funds
40. Junk Bond Funds
41. Mixtures of stock types
42. Closed End Funds
43. Exchange Traded Funds (ETF’s)
44. Stock Picking Strategy - Picking your own stocks?
45. Fund names, and what they really invest in
46. How to get started
47. Where can I start investing with no money?