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."

Overall, 88.4% of the 8,300 equity fund universe studied by Weiss delivered negative returns in the first quarter, with the average stock fund posting a 3.7% loss. Only healthcare, convertible securities and real estate funds reported positive returns for the quarter.

Fixed-income, on the other hand, remained a safe harbor for investors as nearly 98% of bond funds posted positive returns, with an average gain of 1.4%, Weiss said.

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