Created by Standard & Poor’s (S&P) and Morgan Stanely Capital International , they are also known as the Global Industry Classification Standard . S&P sorts companies into sectors based on their primary business activity. Rising yields weigh particularly on valuations of companies in the technology sector, which have high expected future earnings and form a significant part of the market-cap weighted indexes such as the S&P 500.

A company is assigned to a single GICS industry according to the definition of its principal business activity as determined by Standard & Poor’s and MSCI. Revenues are a significant factor in defining principal business activity; however, earnings analysis and market perception are also important criteria for classification. 5 ways to double your money Several of the 69 industries do not have companies represented in the S&P 500 Index; therefore, performance is not available for those industries. The number of industries that do not have representative stocks may vary over time. The energy sector is made up of companies that work in energy sources, equipment, and services.

What are the S&P Sectors?

Companies in the industrials sector are businesses that provide commercial and industrial products, including manufacturers and distributors of capital goods. Examples of the industrials sector stocks best british forex brokers in london include Boeing , CSX Corp , FedEx , Lockheed Martin and Union Pacific . Companies in the financials sector are businesses that provide financial services to commercial and retail customers.

ETFs are similar to mutual funds but trade like stocks, and allow you to get exposure to a wide range of investments in a sector or industry without needing to research individual stocks. If you want to beat the stock market averages over time, one way to do it is to invest in the best sectors of the market. Some mutual funds and exchange-traded funds invest in sectors that tend to grow more rapidly than the economy. The industrial sector encompasses a very wide range of companies that manufacture capital goods, build infrastructure and provide transportation services. The energy sector comprises stocks that are involved in extracting, refining and transporting fossil fuels.

How many sectors are there in the stock market?

Healthcare, consumer discretionary and communication services round out the top list for the largest market sectors ranked by market capitalization. When building a portfolio, you may be interested in one or more specific market sectors. A sector is a slice of the stock market that represents a certain part of the economy or industry.

Two of the largest industries are Aerospace & Defense and Construction & Engineering. The best known names within this sector are Delta Air Lines and Southwest Airlines, FedEx Corporation, and Boeing Company. In contrast to consumer staples, these goods and services are generally those that consumers want but don’t necessarily have to have. Some of the largest real estate companies include American Tower Corp. and Simon Property Group . Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns.

How Much Cushion Does Fixed Income Supply?

The materials sector includes companies that produce chemicals, glass, paper, forestry products, metals, packaging, construction materials and steel. 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 consists of companies that keep people connected. The more exciting part of the sector includes media, entertainment, and interactive media & services companies. Netflix Inc. and Walt Disney Co. are considered part of the communication services sector. Other companies within this sector include AT&T, CBS Corp., and Facebook.

An aging population and rapid advances in biotech make the health care industry a tempting option. This space has led all other sectors in growth over the past decade, and it will no doubt continue that trend in the future. The information technology sector consists of software developers, electronic manufacturers, and other information technology firms. These businesses are generally driven by upgrade cycles, as well as the general health of the economy, not to mention the growth, which has been robust over the years.

You’ll find makers of chemicals, construction materials, and containers and packaging within the materials sector, along with mining stocks and companies specializing in making paper and forest products. JPMorgan Chase, Goldman Sachs, and Bank of America are all examples of financial stocks. Its businesses include hospital conglomerates and institutional services. Other firms in the industry are insurance companies, drug manufacturers, biomedical companies, or medical instrument makers.

Harvesting Sector Beta through Broad Sector Indices

Examples of the materials sector stocks include Alcoa , Dow , Dupont , International Paper and Vulcan Materials . Consumer Staples stocks tend to be resistant to economic downturns due to the stable underlying demand for necessary goods and services, which is why it is viewed as one of the least volatile market sectors. A well-diversified portfolio should have access to as many sectors as possible, and not concentrate too many funds into any single sector or related sectors. For example, if you wanted to diversify within specialty sectors, such as biotech, commercial real estate, or gold miners, you simply keep your allocation to 5% or less for each.

• Based on the numbers, it’s immediately clear that information technology is the largest market sector based on market capitalization.
• Companies in the materials sector are businesses that discover, develop and process raw materials.
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The first 10 columns display annual performance for each asset class from 2012 to 2021. The last column on the right illustrates year-to-date performance, as of 3/31, for 2022. Major materials stocks include Dow, Dupont, Ecolab, and International Paper. The information technology sector is home to the hardware, software, computer equipment, and IT services operations that make it possible for you to be reading this right now. From microprocessors to printers, operating systems to cellphone handsets, recent advances in technology have turned IT into a giant part of the domestic and global economies.

Editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by our partners. Editorial content from NextAdvisor is separate from TIME editorial content and is created by a different team of writers and editors. Some of the largest companies in the consumer services sector are Facebook and Alphabet . The framework created by the Global Industry listen free to technical analysis of the financial markets Classification Standard has four tiers that break companies into 11 sectors, 24 industry groups, 69 industries, and 158 sub-industries. One alternative to the GICS schema is the Industry Classification Benchmark, or ICB. The ICB was developed in 2005 by Dow Jones and FTSE, and divides the market into 11 industries, 20 supersectors and then further into sectors and subsectors.

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Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. This includes food and beverage companies, household product providers, and personal product providers. Consumer staple companies are well known, since people see their products in stores regularly. For example, Procter & Gamble is a famous company within this sector, which produces bleach and laundry detergent under brand names such as Dawn and Tide.

Consumer Discretionary Sector

The industrial sector consists of construction, machinery, fabrication, manufacturing, defense, and aerospace companies. This industry’s growth is driven by demand for building construction and manufactured products such as agricultural equipment. This article presents the 11 sectors of the stock market and the various ETFs that can be used to gain exposure for them.

• This infographic shows how the composition of the global stock market by sector and region has changed substantially from 2012 to 2022.
• 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.
• Reuters, the news and media division of Thomson Reuters, is the world’s largest multimedia news provider, reaching billions of people worldwide every day.
• When you diversify across different sectors and industries, you’re effectively spreading out risk.

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• Mr. Thune has 25 years of wealth management experience and has navigated clients through four bear markets and some of the most challenging economic environments in history.
• The energy sector consists of businesses that source, drill, extract, and refine the raw commodities we need to keep the country going, such as oil and gas.
• Through the first quarter of 2020, the consumer discretionary sector experienced a 10-year growth rate of 206.59%.
• Investing in Financial Stocks The financial sector is made up of more than just banks.

The sector contains companies that produce these goods as well as those that sell them. “For investors, the sector-based approach avoids the risk of targeting an individual company” while still positioning themselves for growth in a broader industry. Stock market sectors group together public companies that have a lot in common, like when they share similar business models and are active in related industries. These sectors are further subdivided into narrower categories by industry.