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The consumer staples sector includes companies involved in food, beverage, and tobacco, as well as producers of household goods and personal products. Since these are goods and services that consumers need, regardless of their current financial condition, consumer staples is considered to be a defensive sector (i.e. recession-proof industries). The utilities sector includes businesses that deliver electricity, gas, and water to consumers. This sector has provided steady returns since 2017—and while it only showed modest growth in the first half of 2022, it was only one of four sectors to show growth at all.
Most of the companies in this sector rely heavily on recurring revenue, while some others earn the bulk of their revenue from advertising revenue . Microsoft, Intel, Visa, MasterCard, Adobe, Salesforce, and Square are some of the largest companies in the tech sector. But they need to buy food and household goods — and they’ll likely buy those things from supermarkets.
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In that scenario, it would seem that industrials would be the largest sector overall while energy and real estate would be the smallest since they only cover two industries apiece. A better way to measure sector size, however, is using market capitalization. Market Cap is the sum of the market value of each company assigned to the applicable GICS sector or industry. Market value or capitalization is calculated by multiplying the number of common shares outstanding by the market price per share at the end of each trading day.
An individual can choose to invest in a single company, within an industry, or across multiple sectors to increase exposure and reduce risk. Or, they may choose to invest in a fund that offers exposure to multiple sectors. The energy sector is made up of companies that explore, produce, and store fuels such as oil, natural gas, and coal.
The information technology sector includes companies in the software industry, technology hardware and equipment, and semiconductors & related semiconductor equipment (i.e., chipmakers). A stock market sector is a high-level grouping of publicly traded businesses that operate within the same general set of industries. Companies in these groups typically have similar characteristics, from business models to products and services, customer bases, cost structures, and margin profiles. The real estate sector includes real estate services companies, real estate developers and equity REITs. This sector may offer strong growth opportunities, but shows steady growth overall.
Knowing these sectors can help investors understand the market and build diversified portfolios. Learn all about how the classification system that separates the stock market into 11 sectors powertrend broker can help investors understand the different sectors of the economy. If you’re trying to determine the biggest market sector is, you could base it on the number of industries covered.
There are 11 stock market sectors, according to the Global Industry Classification Standard, or GICS, which is an industry taxonomy developed in 1999 by MSCI and Standard & Poor’s. Within the entire GICS structure, there are 11 close option review sectors, 24 industry groups, 69 industries and 158 sub-industries into which all major public companies are categorized. You can also buy an exchange-traded-fund , which trades like a stock but which offers full transparency.
How Can I Include Sectors Into My Investment Portfolio?
Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services. Investing in Energy Stocks The economy needs energy across sectors to run smoothly, making these companies potential buys. Some of the largest utilities companies include NextEra Energy , Duke , and The Southern Company . Industrials include a wide range of companies, from airlines and railroad companies to military weapons manufacturers.
For example, you could pick a sector and buy individual stocks that represent one or all of the industries it covers. Or you could invest in a sector mutual fund or exchange-traded fund, such as a utility fund or a tech fund. Within the sectors, there are 24 industry groups, 69 stock market industries and 158 sub-industries that encompass all major publicly listed companies. While this can seem overwhelming at first, there is a method to the madness — many of the companies are household names and brands. The financial sector consists of banks, investment funds, insurance companies and real estate firms, among others. In general, the majority of the revenue generated by the sector comes from mortgages and loans that gain value as interest rates rise.
Real-time analyst ratings, insider transactions, earnings data, and more. MarketBeat contributors discuss how Nike refocusing on direct-to-consumer has the stock moving in the right direction and getting the attention of analysts. She developed her website, College Money Tips, to help families navigate the college journey. She connects with a wide-reaching audience through her site, through an upcoming digital course, and the myriad of publications for which she writes.
In this article, we’ll take a look at the 11 sectors of the stock market and various ETFs that can be used to gain exposure to them. While renewable forms of electricity consumption are included in the Utilities sector, Energy encompasses all other forms of energy production — specifically, oil, natural gas, and coal. Unlike Consumer Staples, the Consumer Discretionary sector experiences greater demand during periods of economic growth, when consumers have more disposable income. GDP and consumer confidence are two key indicators of consumers’ willingness to spend money on non-essential items, as opposed to saving. IT stocks typically carry large premiums (reflecting the growth prospects of start-ups like Palantir or the ubiquity of established firms like Microsoft). However, this carries with it the risk that many tech stocks can be over-inflated, with unprofitable companies buoyed by growth potential until the market gives up on them.
Communication services sector
The move was due to the increasing growth and importance of real estate, especially equity REITs. Following the sectors can help you see what’s hot and what’s not—today, over the past cryptocurrency brokerage firm year, and over longer periods. It can, however, show you how past trends and economic cycles have affected each sector, which can help you decide how to tailor your investments.
Therefore, this compensation may impact how, where and in what order products appear within listing categories. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. The financial sector includes some of the largest financial companies in the world like Visa , JPMorgan Chase , and Bank of America .
- The rate of return on investments can vary widely over time, especially for long term investments.
- It was beaten down even more in the pandemic crash in March 2020, when oil went negative for the first time in history.
- Kent Thune, CFP®, is a fiduciary investment advisor specializing in tactical asset allocation and portfolio management with a focus on ETFs and sector investing.
- Some of the largest utilities companies include NextEra Energy , Duke , and The Southern Company .
Companies such as Exxon Mobil and Chevron extract and refine gas, while companies like Kinder Morgan transport fuel to gas stations. The information technology – IT – sector consists of companies that develop or distribute technological items or services, and includes internet companies. Technology products include computers, microprocessors, and operating systems.
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Some of the largest companies in the healthcare sector are Johnson & Johnson, UnitedHealth Group, and Pfizer. The framework created by the Global Industry Classification Standard has four tiers that break companies into 11 sectors, 24 industry groups, 69 industries, and 158 sub-industries. Even then, I’d be remiss if I didn’t reiterate that there are no guarantees while investing in stocks, and following a sector investing strategy is no exception. Start by getting yourself familiar with how the different stock sectors performed over the last year. If you plan to put your hard-earned money into a stock, you’d better know how its sector has performed. Coming in blind without any knowledge of the way it operates in can be a recipe for disaster.
When deciding which market sectors to invest in, it’s important to look beyond size and consider how well one sector versus another performs. A simple way to measure this is in terms of how performance compares to the broader market as a whole. For example, you might compare one sector to the market using a benchmark like the S&P 500. Outbreaks of infectious diseases, such as the coronavirus pandemic, can positively impact the health care sector by increasing investment for research and development and demand for treatments. MRNA vaccine names such as Moderna , BioNTech and Pfizer are companies that benefited throughout the pandemic. Then begin your trading day by checking to see how the different stock sectors are performing for the day.
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At the other end are media and entertainment companies, including both older media like television and radio and interactive media via the internet and newer forms of communication. Kent Thune, CFP®, is a fiduciary investment advisor specializing in tactical asset allocation and portfolio management with a focus on ETFs and sector investing. Mr. Thune has 25 years of wealth management experience and has navigated clients through four bear markets and some of the most challenging economic environments in history. As a writer, Kent’s articles have been seen on multiple investing and finance websites, including Seeking Alpha, Kiplinger, MarketWatch, The Motley Fool, Yahoo Finance, and The Balance.
Stock market sectors guide: How these 11 slices of the market work
If crude oil’s falling, you can bet that the companies in this sector are falling as well. However, these companies’ stock prices are usually stable, and their generous dividends can make them a good long-term hold, if you’re into that kind of thing. They may also be a good choice if you’re looking to get defensive in a rough market. So it’s a big deal when the GICS classification changes or a company is added to or removed from the schema. The move could cause significant buying or selling of affected stocks, and may even change the company’s ability to access cheaper funding. The offers that appear on this site are from companies that compensate us.
If utilities have a great year, it’s often a sign of rough times for the economy and the overall market. If technology stocks thrive, it’s a sign the economy is doing well and investors are eyeing long-term returns on innovation. Just as each room has specific types of furniture, each sector has certain types of stocks.