The 2020 pandemic hit many companies hard, while other companies took it as a chance to grow, seemingly unaffected by the state of the world around them. NVIDIA (NASDAQ:NVDA) came out as one of those thriving businesses and achieved gains of 122% in 2020. The company’s graphics processing units (GPUs) were present and needed for trends that accelerated exponentially due to the pandemic, boost...
A stock market sector is a stock group that shares similarities, typically due to being from companies in similar industries. We categorize these groups into sectors because it is facilitates comparing companies with similar business models and characteristics.
While investing, you can choose from stocks within sectors that you are interested in. Categorizing these sectors also compares and identifies the stocks that make the most money easier, helping you decide what your next investment should be.
Stock Sectors 101
According to the Global Industry Classification Standard (GICS), there are 11 stock market sectors:
- Consumer Discretionary
- Consumer Staples
- Information Technology
- Communication Services
- Real Estate
This sector has companies that do business in the natural gas and oil industries. This involves companies that produce consumable fuels like oil, gas, coal, and ethanol.
The energy sector also contains businesses that provide equipment and services to oil and gas companies.
This sector does not include renewable energy companies. They are instead considered utility companies.
The biggest stocks in the sector are Chevron (NYSE: CVX) and ExxonMobil (NYSSE: XOM).
The materials sector comprises companies that provide manufacturing goods—makers of construction materials, chemicals, containers, paper, packaging, mining, and forest products.
Paint maker company Sherwin-Williams (NYSE: SHW) and chemical manufacturer DuPont (NYSE: DD) some of the better-known stocks in the sector.
A wide range of businesses makes up this sector. These businesses generally involve the use of heavy equipment and machinery. Companies that are a part of the airline, railroad, aerospace, defence, construction, and engineering industries can be found here. Many conglomerate companies that make building products, equipment and machinery also fall into this category.
Boeing (NYSE: BA) stands as one of the most significant industrial stocks in the U.S.
You can find almost any type of utility company here. You’ll find companies that make electricity available to consumers. Some other utilities are in charge of delivering water. Most utilities specialize in one or more subspecialties. Independent power and renewable energy producers are also part of this sector.
Utility companies tend to operate regionally. American Electric Power (NYSE: AEP) operates across Ohio Valley, while Duke Energy (NYSE: DUK) operates in southeastern parts of the U.S.
This sector can be split into two categories. The first one being companies that develop pharmaceuticals and treatments through clinical trials and testing, and the second one being healthcare equipment and services like diagnostic tools and surgical supplies.
Johnson&Johnson (NYSE: JNJ) is probably one of the most popular and prominent stocks of the sector.
This sector is made up of businesses that handle money. Banks, insurance companies, finance providers, brokerage houses, and real estate investment trusts (mortgage-related) can all be found here.
The financial behemoth JPMorgan Chase (NYSE: JPM) is one of the sector’s biggest stocks.
This sector covers goods and services for consumers. This sector includes anything from high-priced product companies like car companies to leisure products such as a simple drive-thru burger.
Amazon.com (NASDAQ: AMZN) is the most known company in the sector.
Unlike Consumer Discretionary, companies in the Consumer Staples sector include goods and services a consumer needs regardless of their financial situation. Food companies, beverage businesses, and tobacco industries are part of this sector. Household and personal care products also belong here, and retail companies that sell staples, like supermarkets.
Procter&Gamble (NSYE: PG) and Coca-Cola (NYSE: KO) are two of the most relevant stocks in the sector.
This sector is made up of companies involved in digital and technological innovation. Be it software, tech solutions, or hardware components that make tech possible, most companies in this sector all relate to technology.
You probably know two of the biggest companies in this sector: Apple (NASDAQ: APPL) and Microsoft (NASDAQ: MSFT).
Real estate stock companies are responsible for developing new real estate projects and then managing them. Most real estate investment trusts are also part of this sector. Most businesses that operate in the real estate industry are usually considered part of this sector.
The Simon Property Group (NSYE: SPG) is a major shopping mall owner and operator that stands as one of the top stocks in the sector.
Investing in Sectors
Even if you are interested in a sector but don’t want to invest in a specific company or don’t feel ready yet, you can still invest! Lower-risk investments like ETFs and mutual funds that invest in a sector are an excellent way to start.
Sector investing can be a great way to diversify your investment portfolio.