As the first luscious summer produce rolls in, you might ask: Why can't we live on strawberries?

        As Charles Darwin would tell you, the answer is simple: Specialization leads to extinction. The year is long, the strawberry season is short and you'd starve.

        But specialization has gone berserk in the mutual fund industry. Morningstar, the mutual fund tracker, counts more than 450 specialty stock funds. Is there any way to make money from them?

        Possibly. But unless you're a very aggressive investor, you should limit those sector funds to 10 percent to 15 percent of your portfolio.

        Sector funds specialize in one industry, such as technology, real estate or health care. In some cases, specialization clearly has gotten out of hand: Amerindo B2B Internet, for example, is a double specialized fund. It invests only in stocks of Internet companies that sell primarily to other businesses. The Utilities UltraSector fund borrows money to buy conservative utilities stocks, which may appeal only to passive-aggressive investors.

        So how do you choose? Three methods work well:

        • Sector rotation. Stock trends tend to persist for a fairly long time. Some experts look at a sector's price movements and its fundamentals, and try to pick sector funds that will fare well over the next year or so.

        Russ Koesterich, director of research at Instinet, likes cyclical stocks — that is, stocks of companies that fare best when the economy rebounds. The group includes sectors such as steel and autos, but Mr. Koesterich especially likes retailers.In theUnited States, money earned is moneyspent.

        That trend hasn't gone unnoticed, so stocks aren't cheap. But Mr. Koesterich says earnings are likely to increase, and year-over-year earnings comparisons will be easier as the year wears on. Two funds specialize in retailers: Rydex Retailing, up 3.4 percent in 2001, and Fidelity Select Retail , up 4.9 percent. And iShares Consumer Cyclical Sector Index is an exchange-traded fund that trades on the American Stock Exchange.

        Standard & Poor's, the venerable Wall Street stock research firm, also likes consumer cyclicals. It likes energy stocks, too. Energy booms and busts tend to run a long time; S&P expects the current one to last 3 to 5 years. State Street Global Resources is the top-performing natural resources fund the past 12 months, according to Morningstar: it's up 49 percent. The top-performing no-load is RS Global Natural Resources, up 28 percent.

        • Boomer rotation. If you're looking for a long cycle, consider the baby boom. The 79 million people born between 1946 and 1964 are a force in the economy and the financial world.

        Health care is oneplay: The boomers aren't getting any younger.With approaching retirement, they need to save and invest, which argues for financial services funds. And they are big users of technology.

        The past five years, a portfolio split among health care funds, financial services funds and techfunds has gained 111 percent, versus 97 percent for the Standard & Poor's 500-stock index with dividends reinvested.

        The best bet in health funds is Vanguard Health Care, up 22.8 percent the past 12 months. You'll need $25,000 for your minimum initial investment, however. An alternative: T. Rowe Price Health Science , up 26.5 percent. If you want an ETF, consider iShares U.S. Healthcare.

        For financial services funds, consider T. Rowe Price Financial Services, up 26.9 percent. ETF fans can choose from iShares Financial Services or Select SPDR-Financial.

        • Contrarian rotation. Most times, it doesn't pay to run against the herd. But it often pays to buy fund sectors that have had the most redemptions in the past year . A year ago, that meant buying financial services fundsup 24.8 percent the past 12 monthsand real estate funds up 19.2 percent.

        Not surprising, tech funds are the most hated now. The runner-up: International funds. But whatever the strategy, use sector funds sparingly. You don't want specialized funds to lead your portfolio to extinction.

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