The stock market is composed of many different sectors, each representing a different area of the economy. The number of sectors can vary depending on how you classify them, but most experts agree that there are 11 major sectors.
In the following article, I’ll be providing an overview of each one. So whether you’re a novice investor or a seasoned pro, this post will have something for you!
Here is a brief overview of each of the 11 major stock market sectors.
- Consumer Staples: This sector includes companies that sell everyday necessities like food, clothing, and household items.
- Consumer Discretionary: This sector includes companies that sell non-essential goods and services, such as automobiles, entertainment, and travel.
- Energy: This sector includes companies involved in the production and sale of energy products, such as oil, gas, and coal.
- Financials: This sector includes banks, insurance companies, and other financial institutions. It’s also called FinTech and is among the most important stock market sectors at the moment. A popular example of FinTech stock is ripple stock, which has transformed the way to exchange payments globally using blockchain technology.
- Health Care: This sector includes companies involved in the research, development, and production of health care products and services.
- Industrials: This sector includes companies involved in manufacturing, construction, and infrastructure.
- Information Technology: This sector includes companies involved in the research, development, and production of computer hardware and software.
- Materials: This sector includes companies involved in the mining and production of raw materials like metals and minerals.
- Telecommunications Services: This sector includes companies that provide telephone and Internet services.
- Real Estate: This sector includes the companies that provide real estate management and development services. The majority of them are real estate investment funds, real estate leasing and management.
- Utilities: This sector covers all the companies involved in energy sources and utilities like electric, gas, water and other renewable energy industries.
The Different Stock Market Sectors
The stock market is divided into different sectors that group together companies with similar characteristics. These groupings make it easier for investors to target specific areas of the market that fit their investment goals and risk tolerance.
There are 11 different stock market sectors in the U.S., and they are:
- Financial sector
- Information technology
- Health care
- Consumer staples
- Real estate
- Consumer discretionary
- Telecommunications services
Let’s have an indepth look at each of the market sectors from an investment perspective.
#1: The Financial Sector
Financial technology, or FinTech, generally refers to firms that use technology to compete with the more traditional financial services out there. They usually focus on AI, Blockchain, intense or big data, along with cloud technology. There are a multitude of different stocks out there to consider and invest in. Usually, it’s best to consider a stock that’s stood the test of time while also having a great forward outlook.
An example would be ripple stock; they allow you to send money globally on the blockchain and have been touted as a potential competitor to long-standing financial firms that dominate this market.
The financial sector is an important part of the economy and offers a variety of opportunities for investors. While there are some risks associated with investing in this sector, there is also potential for high rewards.
#2: The IT Sector
The technology sector is a category of stocks that relates to the research, development and/or distribution of technologically based goods and services. The sector includes companies involved in the electronic components, computers and software, telecommunications, semiconductor and defense industries.
A company’s market capitalization—the total value of its shares outstanding—is used to classify that company as either small cap, mid cap or large cap.
#3: The Healthcare Sector
The healthcare sector is one of the eleven stock market sectors in the United States. It comprises companies that are involved in the provision of healthcare services, medical devices, and pharmaceuticals. The sector includes both publicly traded and privately held companies.
The healthcare sector is a large and important part of the economy. In 2019, it was estimated to be worth $3.8 trillion, or nearly 19% of the U.S. economy. The sector employs over 12 million people or about 8% of the U.S. workforce.
The healthcare sector is expected to continue to grow in the years ahead, as the population ages and as advances are made in medical technology.
#4: The Consumer Goods Sector
The consumer goods sector is one of 11 stock market sectors. It includes companies that produce consumer goods, such as food, beverages, tobacco, household products, personal care products and clothing.
The consumer goods sector is often further divided into two subsectors:
- Consumer Staples: This sub-sector includes companies that produce essential items, such as food and beverage, tobacco and household products. These companies are less sensitive to economic cycles than other consumer-facing companies.
- Consumer Discretionary: This sub-sector includes companies that produce non-essential items, such as apparel, automobiles, leisure products and media. These companies are more sensitive to economic cycles than other consumer-facing companies.
#5: The Utilities Sector
The Utilities sector is one of the eleven stock market sectors. Utilities companies provide essential goods and services such as electricity, natural gas, water, and garbage collection to consumers. The sector includes four industries: Electric Utilities, Gas Utilities, Multi-Utilities, and Water Utilities.
The majority of utilities companies are electric utilities, which generate and sell electricity to consumers. Electric utilities are regulated by state Public Utility Commissions (PUCs). Gas Utilities distribute natural gas to consumers. They are regulated by state PUCs or the FederalEnergy Regulatory Commission (FERC). Multi-utilities companies provide a combination of two utilities services, such as electricity and gas or electricity and water.
Water utilities manage the provision of water to consumers. They might also be involved in the recycling and treatment of wastewater. Water utilities are usually owned by municipalities or enterprises and are not traded on stock exchanges.
#6: Real Estate Sector:
This sector mostly includes real estate investment trusts. REITs are a type of company that owns and operates income-producing real estate, such as office buildings, shopping centers, apartments, and warehouses.
REITs are required by law to return at least 90% of their taxable income to shareholders in the form of dividends. Many REITs also offer shareholders the opportunity to participate in the upside potential of their properties through share price appreciation.
#7: Materials Sector
It involves all the business related to manufacturing and consumption material like chemicals, containers, metal, glass and forest products. Some popular examples could be DuPont, The Sherwin-Williams Company.
#8: Industrials Sector
As the name suggests, this sector includes the companies that deal with the production and services of large machinery related to construction, engineering, electrical equipment, commercial supplies, aerospace and defense.
For example, Honeywell, Union Pacific and Boeing are some huge companies.
#9: Energy Sector
The energy sector is made up of businesses that deal with energy resources like oil and natural gas, as well as companies that provide services to these industries. This sector is essential to our economy and our way of life, and it is constantly evolving.
Popular stocks include Chevron and ExxonMobil in the energy sector.
#10: Consumer discretionary
The consumer discretionary sector contains companies that produce items that consumers desire but don’t always need. Usually, these companies are cyclical, which means they excel during prosperous economic periods but not so much during economic decline.
For example, hotels, retail companies, travel industries, luxury goods and service companies. Tesla and Amazon are the two largest companies in this sector.
#11: Telecommunications services
The communication services sector is broad and contains many companies that provide telecommunication and entertainment services companies.
For example, Facebook and Alphabet (by Google) are the two largest companies in the telecommunication sector.
These are the top 11 stock market sectors. I hope you have got some clarification after reading this article. This will surely help you pick the right stocks to invest in and maximize your profits.
Remember, paying attention to your personal finances is important. It might not be the most exciting thing to do, but it’s worth it in the long run. By monitoring your spending and making sure you’re staying on top of your bills, you can make sure that your financial future is bright. The key is to hedge your investment by not overexposing your position to one sector. Always try to keep a varied portfolio.