But when the economy is growing, the real estate sector tends to do well. Stocks in the real estate sector can be a great long-term investment. And another popular way to invest is a real estate investment trust . The Charles Schwab Corporation provides a full range of brokerage, banking and financial advisory services through its operating subsidiaries.

However, when correction comes, knowing which sectors are safe is an important part of protecting yourself. If you’re new to the stock market then it’s important to know how to trade different stock sectors the right way. Knowing when to buy low and sell high is very important because that’s how profits are made.

11 sectors of the stock market

So although energy vastly underperformed the S&P 500 in 2020, the sector turned around and produced the highest returns since then. Here are the 11 stock market sectors, starting with the highest-growth stock sector from 2017 to 2022 and descending in order. The information technology sector includes a wide range of companies involved in the manufacturing, distribution, market, and more of both hardware and software. Some of the most common components within this sector include IT services, software, communication equipment, hardware, electrical equipment, and more. A total market index fund is a great way to keep your portfolio diversified, while also getting a piece of the 500 largest companies of the U.S. stock market.

sectors of the stock market

IT stocks typically carry large premiums (reflecting the growth prospects of start-ups like Palantir or the ubiquity of established firms like Microsoft). However, this carries with it the risk that many tech stocks can be over-inflated, with unprofitable companies buoyed by tradeallcrypto growth potential until the market gives up on them. Rapid obsolescence cycles also increase volatility in IT stocks. Investors and traders can select ETFs with a focus on certain areas of the IT sector for broad exposure to different elements of this large and varied space.

Each of the eleven sectors brings a unique dynamic to the stock market, affecting profitability in various ways. Investors looking to increase exposure to specific sectors can utilize any number of ETFs to achieve their asset allocation goals. The energy sector consists of oil and gas production and exploration companies, in addition to power firms, refineries, and other related operations.

By charging consumers and businesses providing higher-than-average dividend yields, this sector is able to by and large generate a consistent recurring income. The consumer staples sector focuses on food and beverage companies, in addition to companies creating products consumers have no desire to cut from their budgets. These companies can general withstand an economic downturn, as they are defensive plays.

You usually don’t have a winning offense without a good defense. This information can be quite helpful to traders and investors looking to find a good play in a market that doesn’t have many. This information can be quite helpful totradersand investors looking to find a good play in a market that doesn’t have many. Sector performance shows the impact of trends and economic cycles, which can help you tailor your investment strategy. Doug is a Chartered Alternative Investment Analyst who spent more than 20 years as a derivatives market maker and asset manager before “reincarnating” as a financial media professional a decade ago. Dan is a veteran writer and editor specializing in financial news, market education, and public relations.

If you’re ready to be matched with local advisors who will help you achieve your financial goals,get started now. When deciding which market sectors to invest in, it’s important to look beyond size and consider how well one sector versus another performs. A simple way to measure this is in terms of how performance compares to the broader market as a whole. For example, you might compare one sector to the market using a benchmark like the S&P 500. Companies in the real estate sector are involved in developing and managing real estate.

11 sectors of the stock market

House prices have tended to rise consistently over long periods of time. Periods of recession, like the 2008 financial crisis, tend to lower house prices, but their effects tend to be short-lived and house prices then continue to trend upwards. For example, US house prices had recovered to pre-crisis levels by 2013. While individual Communication Services stocks can be volatile, the sector as a whole has experienced sustained growth and its stocks occasionally exhibit both growth and value traits. The Fidelity MSCI Consumer Staples Index ETF​ offers investors and traders exposure to the Consumer Staples sector by tracking the performance of the MSCI USA IMI Consumer Staples Index.

What Are Stock Market Sectors, and How Many Are There?

Even then, I’d be remiss if I didn’t reiterate that there are no guarantees while investing in stocks, and following a sector investing strategy is no exception. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in oureditorial policy. You can check our sector Power Rankings here – where you can download the whole list of U.S. and international equity market ETFs in a spreadsheet to do your custom analysis.

The industrials sector includes stocks related to the production and distribution of capital goods, typically those used in producing other goods rather than being purchased directly by consumers. Companies within the consumer staples sector make goods that are always needed, such as food, beverages, and household and personal-care products. You’ll also find retail companies that specialize in selling these goods, such as grocery stores. This sector may remain stable or potentially even provide growth during economic slumps. Similar to the materials sector, consumer staples almost matched the growth of the S&P 500 in the three years leading up to mid-2022. During the pandemic-related market drop in 2020, the consumer staples and healthcare sectors dipped but still fared better than the nine others.

11 sectors of the stock market

They are the most important factor that goes into taking a trade. Apple goes in the technology room, or sector, along with stocks Cisco and IBM , for instance, and ExxonMobil goes in the energy sector with stocks mt4 spread indicator like Chevron and ConocoPhillips . Financials stocks are sensitive to changes in the economy, monetary policy and regulatory policy, which is why they tend to perform better at the beginning of business cycles.

By maintaining that knowledge, it can serve as a cornerstone to help you make better decisions as you build your portfolio. Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate. The technology sector consists of electronics manufacturers, software developers and information technology firms. In general, these businesses are driven by upgrade cycles and the general health of the economy, although growth has been robust over the years.

Consumer discretionary sector

Under the financials umbrella, the biggest industry representation is banks, followed by capital markets and insurance. Healthcare, consumer discretionary and communication services round out the top list for the largest market sectors ranked by market capitalization. Some of the more common industries in this sector include banking, mortgages, financial services, consumer finance, asset management, capital markets, financial exchanges, REITs, insurance, and more. The health care sector includes companies that provide health care services, as well as health care equipment and technology.

The 11 stock market sectors play an important role in the U.S. stock market. And today it’s easier than ever for investors to gain exposure to an entire portfolio without investing in individual companies. Are you wondering how the different stock market sectors affect your portfolio? The answer is to pick a total market fund that can help you get all 11 sectors into your portfolio. The utilities sector includes companies providing electricity, gas and water as well as energy traders and distributors of energy.

  • Some funds may even report sector breakdowns daily on the fund’s website.
  • The stock market can be an overwhelming place, especially if you’re new to the scene.
  • As mentioned, some sectors may be more in favor during certain periods of the business cycle than others.
  • Companies in the materials sector are businesses that discover, develop and process raw materials.
  • MSCI and S&P Dow Jones Indices use revenues as a key factor in determining a firm’s principal business activity.

Its hierarchy begins with 11 sectors which can be further delineated to 24 industry groups, 69 industries, and 158 sub-industries. It follows a coding system that assigns a code from each grouping to every company publicly traded in the market. The GICS coding system is integrated throughout the industry allowing for detailed reporting pros and cons of floating exchange rate and stock screening through financial technology. Therefore fund analysis is used by fund managers to exclude specific investments. This often occurs with environmental, social, and governance focused funds. These funds seek to exclude industries or companies that their investors consider undesirable for various reasons.

Common investment questions

The stock market may seem overwhelming, but the classification system that separates the stock market into 11 sectors can help investors understand the different sectors of the economy. An individual can choose to invest in a single company, within an industry, or across multiple sectors to increase exposure and reduce risk. Or, they may choose to invest in a fund that offers exposure to multiple sectors.

A stock market sector is a group of public companies that share similar business activities, products and services, or characteristics. Large fund companies that managed index-based funds had to buy more of these real estate stocks in order to match the new weightings in the sector index. The communication services sector is the newest of the GICS sectors and includes a couple of major areas that used to be part of other sectors. Telecommunication services providers, including both wireless telecom networks and providers of old-style landline services, make up one wing of the sector. At the other end are media and entertainment companies, including both older media like television and radio and interactive media via the internet and newer forms of communication.

A sector exchange-traded fund invests in the stocks and securities of a specific sector, typically identified in the fund title. A well-diversified portfolio should not have too many investments concentrated in a single sector or group of related sectors. The sector breakdown of a portfolio shows how much asset weights are allocated to what industry sectors.

The industrial sector consists of aerospace, defense, machinery, construction, fabrication and manufacturing companies. In general, the industry’s growth is driven by demand for building construction and manufactured products like agricultural equipment. The healthcare sector consists of biotechnology companies, hospital management firms, medical device manufacturers and many others. In general, the sector is considered to be both a growth opportunity and defensive play since people will always require medical aid. The materials sector is made up of companies that manufacture and market goods used in manufacturing.

But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. Utility companies provide or generate electricity, water, and gas to buildings and households. For example, Duke Energy generates and distributes electricity, and Southern Company provides gas and electricity.