It is important to know about the different sectors of the market as an investor. In many cases the market moves in a single direction, but there can often be times when sectors of the market move independent of one another. Right now is the perfect time that you need to be invested in different assets. The market is going crazy up and down due to the Corona virus and some stocks are doing great while most are falling flat.
Healthcare is going up because people fear the virus while discretionary consumer spending stocks are taking a big hit.
Commodities trade based on supply and demand rather than how the market moves as a whole.
Oil/Gas is notorious for changing based on the price of a barrel of oil rather than how the economy is performing.
You better know the different sectors of the stock market so you know which stocks to choose to reach financial independence. Some stock sectors pay high and steady dividends like utilities. This will get you to early retirement faster. Specifically if you are investing to live off dividends in retirement.
You reduce your portfolio risk when you diversify into different stocks. But do not diversify too much. You want pick a few stocks that you have researched and believe it. Some sectors out perform other sectors and many are intertwined.
Learning about the different sectors of the market may seem boring or unimportant, but wealth should be boring.
Do not let you emotions get the best of you when investing
Building wealth should be boring and automatic. If the market goes up you win. If the market goes down you also win. But it is important that you be invested in the market. If you are not invested you cannot win.
Lets go through the different sectors. There are 11 different sectors of the stock market:
The healthcare sector consists of companies that produce medical equipment, provide health insurance, manufacturer drugs, or provide medical serves to patients.
This sector includes pharmaceutical companies and biotechnology companies.
Examples of companies include:
– WBA – Walgreens
– MCK – McKesson
– UNH – United Health Group
This sector includes businesses that provide water, gas, and electric to customers. These business are heavily regulated by the government and require high infrastructure costs. This can lead large capital investments in the form of debt or equity subject to changing interest rates.
These companies generally have steady and reliable income and are therefore good investments for conservative long term investors.
– DUK – Duke Energy
– NEE – NextEra
– D – Dominion Energy
– SO – Southern Company
- Real Estate
The Real Estate sector consists companies involved in the buying, selling, and leasing/renting of property. This includes structures and land.
This sector can be broken up into residential, commercial and industrial. This feature also features REITs – real estate investment trusts. These are portfolios of real estate property that produce income. They are traded just like stocks, but have certain guidelines.
– American Tower Corp
– Simon Property Group
– Public Storage
This sector includes companies involved in producing and supplying energy. This sector generally includes companies involved in oil/gas, renewable energy, coal energy, and delivery of energy. Many of these companies overlap other sectors such as materials and industrials in an effort to meet the needs of energy development. This sector is known for having companies that pay healthy dividends.
– Exxon Mobil
– Conoco Phillips
– British Petroleum
– Marathon Oil
– Clearway Energy
This sector includes companies in acquisition, development, and processing of raw materials. This includes mining, metals, and forestry.
– US Concrete
– Applied Material
– Martin Marietta
This sector includes companies that provide equipment, services, transportation, or distribution. This includes, airlines, machinery, airlines and waste management.
– Waste Management
– American Airlines
This sector includes companies which facilitate communication. These include cable/satellite, internet service providers, and cell phone providers.
– T – AT&T
– V – Verizon
– S – Sprint
– Frontier Communications
One is the most popular and fastest growing sectors is technology. These companies include hardware and software products. Most of these stocks are listed on the NASDAQ.
- Consumer Discretionary
This sector includes companies that provide goods and services that are considered non-essential. Apparel, Entertainment, Food and beverage, Automobile, Hotels.
– Home Depot
– DR Horton
- Consumer Staples
This sector includes companies that provide essential everyday goods. These companies provide goods that people buy on a continual basis. Food, beverage, Tobacco, medical supplies. These companies are often large and must sell a lot of products at low prices to be competitive. They often pay dividends and earn steady revenue, but can be slower to grow.
– KO – Coca Cola
– Procter and Gamble
– Kimberly Clark
– Phillip Morris
Companies in this sector provide financial services to consumers and commercial businesses. These companies are some of the largest and most important in the economy, because they lend money to consumers and businesses. These companies include banks, investment firms, and insurance companies. These stocks often pay dividends and are tied to the overall economy and interest rates.
– TD Ameritrade
– Bank of America
– Wells Fargo
– JP Morgan Chase
– American International Group
I would also recommend stock sector index investing. There are index funds for each sector of the stock market.
Some sectors definitely perform better than others. Some sectors are more volatile than others. Some sectors pay more dividends than others.
One sector can move independent of another. So use different sectors to balance out your risk. If you feel you need more portfolio protection.
Do not get caught up changing your investments all the time. Do your research. Have confidence in the investment choices you make and stick with them. Time and consistency matter in building your wealth.
Choose one or two sectors that you think will win in the future and hold them for life.
I believe the tech sector is going to grow faster than others, due to the increasing power of computing.
Leave a comment or email me. I read each one.
Subscribe. New articles Monday – Friday