Examine Sector Weightings and the Fund’s Concentration:
The funds that have large stakes in just one or two sectors are expected be more volatile than the evenly diversified funds. A concentrated portfolio may also get more successful if its stocks are performing better. You may add a concentrated fund in your portfolio but mostly the concentration should be in a diversified fund which is more predictable.

Invest in a few funds and develop a Plan:
But it would not mean you should invest only in one fund. Even though the funds are diversified, many funds go though a few years of poor performance. When you invest in only one fund, you might lose heavily. On the other hand, investing in too many funds may lead to duplication of many securities and a portfolio with no focus. For the long-term financial goals, equities are the best option.

Keep It Simple:
To keep the selection of fund simple, you should stick with well diversified and well established equity funds, an index fund for equity exposure and a floating-rate bond fund for fixed income exposure. For long term perspective, equities are the best performing asset class. One should normally stay away from speciality and sector funds because they have a huge risk associated.

Know Your Portfolio & Ignore the hot stocks and funds:
Avoid going for impulsive purchase. It is wise to invest in a fund that invests in stocks that make up an index. This way, you will do no worse than the market. Since, in the long run, markets have a tendency to go up, even your investment will move the same way. But in case, you are a little more active, you can go for established `value’ funds that invest in undervalued securities.