But the mining industry continues to consolidate through mergers and acquisitions, making true diversification increasingly difficult. (Jumping into bubble sectors is one of seven costly mutual funds mistakes to avoid -- see the complete list here.

Even back in 2006, French warned of the dangers in the industry, saying in an interview with TheStreet.com that over the previous five years or so mining companies "were prudent. There was very little mergers and acquisitions silliness."

French's complaint was that the prices being paid were too high and that companies were buying and merging simply to grow larger, without concern for whether it was in the best interests of shareholders.

The issue with funds that focus on miners is that the performance of mining stocks is leveraged to the price of the underlying commodity being pulled from the ground. Once a company is being paid enough to cover its costs of operations, any additional price increases tend to flow quite quickly to the bottom line.

However, the flip side is also true. As commodity prices fall closer to, or below the costs of production, earnings collapse and the stocks begin to become the proverbial lead balloons. I'd rather keep a bit more lift in my portfolio. (I recommend that you stay away from Vanguard's top fund for 2008 as well. Find out why here.)

VGPMX Is For Speculators, Not Investors

And the big question for most investors should be, "How much of my portfolio do I really want to stake on this volatile sector?"

A 5% position would be large and still wouldn't protect you much if all your other holdings were tumbling.

Considering the huge risks associated with this sector, this fund is only for speculators, not investors. And even speculators shouldn't allocate more than 5% of their portfolio to it. (Get details on 5 Vanguard Funds to Avoid here.)

Millions of Vanguard investors will be left in the dust even after the economy recovers. But you don't have to be one of them. You can set yourself up right now to be first to profit… and then sprint ahead of the typical Vanguard investor by an amazing 94% margin. Learn more about The Independent Adviser for Vanguard Investors here.