Stocks part 3: Market Sectors

“Behind every stock is a company. Find out what it’s doing.” – Peter Lynch

The stock market is divided into different sectors that provide unique qualities to each investment portfolio. Before jumping into the stock market, take the time to learn about the various stock market sectors. There are 11 different stock sectors within the stock market. Each sector of the market creates different opportunities for its investors.

11 Sectors

Below are the 11 stock market sectors along with a few examples of the types of companies within the sector according to ETFdb.com.

1. Healthcare – biotech companies, hospital management firms, and medical device manufacturers
2. Energy – oil and gas exploration companies
3. Financials – banks, investment funds, and insurance companies
4. Technology – software developers, IT firms, electronic manufacturers
5. Real estate – consists of residential, retail real estate, and industrial real estate
6. Utilities – electric, gas, and water companies
7. Consumer discretionary – retailers, media companies, consumer services, and construction
8. Communication services – wireless, cable, and internet providers
9. Consumer staples – food companies, beverage companies, and personal hygiene companies
10. Industrials – construction, machining, and defense
11. Materials – mining, refining, and forestry companies

Recession Protection Stock Sectors

Recession protection stocks provide consistent dividends along with consistent earnings. It does not affect the conditions of the economy. Examples of recession protection stock sectors are:

Utilities – water, gas, and electricity.

Consumer staples – food, drinks, and toiletries.

People will always need food and electricity.

Cyclical Stock Sectors

Cyclical stocks rise and fall with the economy. These types of stocks are considered “luxuries.” If the economy crashes, these stock sector businesses have a higher chance of going bankrupt.

Cyclical stock sectors include:

Real estate

Materials

Industrial

Finances

Health Care

Informational technology

Energy

Communication services

Consumer discretionary

Wrap up

Becoming a successful investor takes practice and patience. However, understanding the different sectors within the stock market increase your confidence and knowledge. Check out stocks part 2 if you missed it!