A diversified portfolio is not only split amongst stock and other investments but also across different (or at least several) sectors of the stock market. In this Stock Market Sectors list, we will reveal the 9 major stock sectors and give an overview of each of these major stock sectors.
Stock Market Sectors List
Below, I will go over each major sector in the stock market as well as give you some ideas of what sort of companies you can expect to find in each of these sectors. You will also discover what situations could make prices across in this sector rise or fall across the board so you can learn how to invest more intelligently.
Basic materials refers to the most commonly traded commodities on the stock market, such as oil, gold, silver, gas, and copper. All metals fall into this category as do many chemicals which are too numerous to list.
Not only does this sector include the actual commodities, but it also involves companies which specialize in harvesting them, such as gold mining companies or oil drilling corporations. The stock prices of companies that drill or mine for basic materials are highly dependent upon the price of the materials themselves, which makes them part of this sector.
Learn more on how to invest in this stock sector in our article on Basic Materials ETFs and Stock.
Conglomerates are companies which have products in many different sectors and as a result do not really fit under any other umbrella. One of the most well-known conglomerates is General Electric. This company sells everything from medical technology to oil.
The major criticism of conglomerates is that they have limited upside. This is partially true; sometimes one part of the company might be performing very well and be in a great sector, where other parts of the company may be bleeding money in losing sectors. However, following the example of GE, they have been able to post very strong growth in the last half of the 20th century despite being a conglomerate.
On the other hand though, that same weakness may be seen as a strength by others. Despite lacking a central focus which limits growth, the diversification also limits potential pitfalls. If a company is invested in many different sectors, it is more likely to weather through recessions. Learn more: Investing in Conglomerates.
Consumer goods includes everything from food and drinks to toilet paper. Anything people buy from retail shops like Walmart or a grocery store would fit into this category.
Note that this stock market sector is so broad it can be a little misleading. Consumer essentials like toilet paper and food stocks tend to be stable in recessions, whereas other parts of this sector such as recreational goods can fall during this time.
Also, note that stores which sell consumer goods tend to fall into the services sector. Companies that produce food products would be in the consumer goods sector, whereas grocery stores belong to the services sector. Learn more: Investing in Consumer Goods Stocks.
If the price of gold and oil wasn’t so high at the time of this writing, the Financial sector would be the largest stock market sector on this list. This includes banks and investment companies such as Morgan Stanley or Bank of America.
Additionally, insurance policies and real estate agencies fall into the Financial stock sector as well. Note that this includes health insurance, which is in the financial sector rather than the health care sector.
Financials do very well when the economy is doing well, and tend to do very poorly when the economy is doing poorly. This can be evidenced with the huge losses to stock value that many financial giants incurred during the 2008-2010 time period. Learn more: Financial Services Stocks and Mutual Funds.
When it comes to the stock market, the health care industry is not nearly as big as you might think. This may be perhaps due to the fact that many hospitals are owned by Universities, which are not publicly traded companies.
Nearly the entirety of the Healthcare stock market sector is made up of drug manufacturers. After that, bio-tech companies and companies which produce medical equipment make up nearly the rest of the entire sector. Hospitals, research, and diagnostics make up a very small minority of the health care sector when it comes to the stock market.
Given that this sector is very heavily weighted on the drug industry, any regulations promoted by organizations like the FDA can heavily impact this industry. Typically individual stocks tend to rise and fall the most in price; an expiring patent or drug recall can make a company’s value plummet whereas a new patent can make it drastically rise. Learn more: Health Care Stocks.
The industrial goods sector is propped up by three major industries: defense, aerospace, and construction equipment. Giants in this industry include companies like Caterpillar and Boeing.
Given that Government-sponsored defense contracts prop up a large portion of this industry, recent defense cuts aimed at trimming the US deficit can effect stock prices.
Additionally, many companies in this category are big exporters, so the world’s economic state can have a big influence on their value. For example, companies like Caterpillar help produce construction equipment for countries around the world, so if those countries are doing well, so well Caterpillar, regardless of the state of the US economy. Learn more in our section on Industrial Stocks.
While the services sector provides a lot of jobs in industrialized nations, the actual contribution of this sector to the stock market is relatively low compared to the giant Basic Materials and Financial sectors.
This sector includes practically every shop or service you might use, from the grocery store to your accountant. This sector is also very broad and rarely rises or falls across the board.
As an example of this, sporting goods stores will tank during a recession whereas grocery stores can often realize a lot of growth. People have to buy food but do not need to buy sporting goods. Learn more: Investing in the Services Sector.
The technology sector is very popular amongst investors given the propensity for companies to grow very rapidly in a short amount of time. For example, Apple has gone from relative obscurity in the 1990s to being the most valuable stock in the world (at the time of this writing) in a relative short period of time.
Any company which creates computers, cell phones, software, or related parts fits into this category. Note that internet service providers and many other internet-based software or services fit into the technology sector rather than the services sector.
While all sectors tend to be based on the performance of the overall economy, individual technology stocks have a history of being very volatile and you really need to research companies well before investing in them. For every growth explosion like Microsoft or Apple there are 100 other tech companies which went bankrupt. Learn more in our section on Tech Stocks and Technology Mutual Funds.
The utilities stock sector consists of companies which sell energy, water, and gas. Note that this these are utilities used by consumers or businesses, not basic materials. A company which sells wind energy would fit into the utilities stock sector, whereas a company that drills for oil would belong to Basic Materials.
Utilities are a strange sector to get into in many areas simply because the prices of electricity are often regulated by government agencies. Additionally, many companies might get grants from the government for producing a certain amount of green energy. This is not a sector to invest in lightly without heavy research. Learn more in our section on Utilities Stocks.
Stock Market Sectors List Conclusion
By investing in more than one sector on this stock market sectors list, you can help reduce the risk of your portfolio tanking due to economic conditions or new government regulations.
Regardless of stock sectors, picking good companies to invest in is always the best decision. Learning how to invest in the stock market involves plenty of research into particular companies before investing. If you cannot find a good company in every sector, there is no need to force investing there when there are 8 other sectors to choose from.