After posting sparkling returns last year, precious metals mutual funds took a turn for the worse in the first quarter of 2003. On average, precious metals funds lost 11.6% in the three-month period ending March 31, reversing a 35.9% gain in the year-ago quarter, according to independent ratings firm Weiss Ratings.

"This is a good example of the risks of chasing the hottest sector," said David Lackey, president of Weiss Ratings. "Sector-chasing may work for nimble traders, but most investors are better off establishing a diversified portfolio that meets their individual risk profiles."

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