Since Sector-based index funds track specific market indices, they may be heavily concentrated in certain sectors or industries, exposing investors to sector-specific risks.
Index funds may not perfectly replicate the performance of their underlying indices due to factors such as fees, expenses, and trading inefficiencies, leading to a deviation in returns from the benchmark index.
In times of market stress, liquidity in the underlying securities of an index fund can dry up, making it difficult to buy or sell shares at desired prices.