Stock Market Sectors
Stock market sector simply refers to groups of stocks that are engaged in a similar business or industry. This is important to understand because various sectors can rise and fall depending upon the current market and demand (or lack thereof) for their products.
When considering what stocks to buy for your investment portfolio, it helps to look at what sectors are strong, emerging, or declining so you can decide where, when and how to invest.
Below are a list of various stock sectors:
- Communications
- Consumer Discretionary
- Consumer Staples
- Energy
- Financials
- Healthcare
- IT
- Industrials
- Materials
- Real Estate
- Utilities
The Communication Sector
The communication sector includes companies that provide telecommunications (wireless and landlines) along with television and media companies.
Examples are: Verizon (NYSE: VZ) and T-Mobile (Nasdaq: TMUS)
The Consumer Discretionary Sector
Stocks in the consumer discretionary sector offer goods and products that may or may not be necessary, and financial status determines the capacity to buy them. You might not be able to buy an expensive car or a Rolex watch, but they are consumer products you could buy if you had the income.
Examples are: Peloton (Nasdaq: PTON) and Nike (NYSE: NKE)
The Consumer Staples Sector
While stocks in the consumer discretionary sector are not necessary for one’s daily life, consumer staples are. Everyone needs to buy food, so stocks like supermarkets are a part of this sector.
Examples are: Kroger (NYSE: KR) and Target (NYSE: TGT)
The Energy Sector
This sector has companies providing a service or product in the energy industry, like oil and gas companies, along with producers of coal and ethanol.
Also included are companies that provide equipment or services to oil and gas companies.
Examples are: Chevron (NYSE: CVX) and Exxon Mobil (NYSE: XOM)
The Financials Sector
Stocks in the financials sector are ones that have to do with money and handling financial services. Banks, mortgage lenders and real estate investment trusts are all within this sector.
Examples are: Visa (NYSE: V) and PayPal (Nasdaq: PYPL)
The Healthcare Sector
This is a broad sector of stocks from biotech to pharmaceuticals, along with healthcare providers and equipment makers.
Examples are: Pfizer (NYSE: PFE) and Teladoc Health (NYSE: TDOC)
The IT Sector (Information Technology)
Stocks in the IT sector focus on software, technological solutions, semiconductors, hardware and basically anything to make tech available.
Examples are: Apple (Nasdaq: AAPL) and Microsoft (Nasdaq: MSFT)
The Industrials Sector
Stocks in the industrials sector cover a broad range from airlines, railroads, defense contractors to construction.
Examples are: American Airlines (Nasdaq: AAL) and Raytheon (NYSE: RTX)
The Materials Sector
Stocks within the materials sector offer products and goods for use in construction, materials, chemicals and manufacturing.
Examples are: Sherwin-Williams (NYSE: SHW) and US Steel (NYSE: X)
The Real Estate Sector
Stocks in the real estate sector cover companies and services such as real estate developers, real estate managers and REITs.
Examples are: Zillow (Nasdaq: Z) and Simon Property Group (NYSE: SPG)
The Utilities Sector
There are various forms of utilities provided to the American public and companies that provide these services and products are within the utilities sector.
This can range from electricity to natural gas along with renewable energy. While some utility companies are national, most are regional.
Examples are: PG&E (NYSE: PCG) and Duke Energy (NYSE: DUK)
Investing in Sectors
Depending upon the market conditions, various sectors of stocks can be in greater or lessor demand. Thus one should consider the changing trends of the market when deciding what sectors to invest stocks in.
Stock investors can consider buying just one stock to get exposure to that sector, or if they think a sector will dominate for years, consider getting multiple stocks to increase your exposure to a rising trend in that sector.
You may want to consider ETF’s for a particular sector which diversifies the risk across a broad range of companies.
Regardless, sector investing should be a strategy stock investors should consider as some will do well in a recession while others may underperform.