There is a meteoric rise in stock market investments. As such, different sectors have been established to group familiar stocks. Categorizing makes it easier to compare business models and money returns.
The sectors have different companies’ stocks. These companies have special dynamics and profitability. You can find a company with insider stock selling going on and how it is disclosed.
According to the Global Classification Standard (GICS), there are 11 different stock market sectors. Below are some sectors you should look out for in 2021:
1. Utilities Sector
Utility companies provide gas, electricity, water, and renewable energy. The sector gives constant, stable income to their investors. That is because they charge their customers regularly.
Charge rates for utilities are either government-approved or mutually agreed upon. Utility stocks are a risk-averse option for investors.
2. Financials Sector
The financial sector involves businesses dealing with finances and money handling. Key companies include banks, insurance companies, and mortgage real estate. They are one of the most popular stocks in the market.
3. Industrials Sector
Undoubtedly, industries are the backbone of a nation’s economy. They feature a wide array of companies to invest in. Examples are transportation, logistics, construction, and engineering companies. They also encompass companies making industrial machinery and equipment.
It is a highly flexible sector concerning economic changes. However, investing in a company that is durable lifts this problem. A robust industrial business has low operating costs and an investment-grade bond rating.
4. Communication Sector
The communication sector is the most recent of the GICS sectors. It comprises telecommunication services providers and media or entertainment companies. The industry remains a leader in economic expansion and growth.
Before investing, compare related companies as this is a vast sector. With technological advancements, this sector will seemingly always grow to provide solid returns in the long run.
5. Energy Sector
Companies dealing with oil and natural gas are of the energy sector. The companies, however, do not include renewable energy companies. That is their difference to utilities. The energy sector is broad and investors need to understand it first.
6. Materials Sector
The materials sector provides goods for manufacturing and other applications. It includes chemical, mining, and lumbering companies. Stiff competition in this sector means profits and investment returns are easily affected. Its cyclical nature means you need to know the current economic cycle before investing.
7. Healthcare Sector
Healthcare is one of the essential stock markets. It features the pharmaceuticals development end. Additionally, it features healthcare equipment and services companies. The sector is broad and highly regulated. Below the 4 types of healthcare sector:
- Drug stocks
- Medical device stocks
- Payer stocks
- Healthcare provider stocks
8. Information Technologies Sector
Any technological innovation companies fall under the IT sector. One good example of such companies is Microsoft. The most valuable companies in the world belong to this sector.
The perfect IT stock trades at a reasonable valuation given its growth prospects. It’s advisable to invest only when you trust the growth prospects.
9. Real Estate
The real estate sector sets up two different types of investments. One type is the stocks via new real estate projects and the management of these projects through renting out. Most real estate investment trusts are also part of this sector.
It is advisable to be patient and invest long-term when it comes to real estate.
10. Consumer Staples Sector
The sector includes goods and services that consumers need. It features companies that produce beverages, foods, tobacco, and household items. The products are a must-have regardless of the economic situation. Thus, the consumer staples sector tends to be safe investments.
Consumer staples stocks lack the highest earnings growth. However, they have reliable profits and dividends and low price volatility.
11. Consumer Discretionary Sector
Companies in these sectors transact goods and services dependable on the consumer’s financial power. They deal with luxury or nice-to-have products. The consumer discretionary sector includes automobiles and leisure goods companies.
Stocks in this sector blossom with solid economic times. However, during times people have no money, the stocks fall.
In 2021 we’ll have a volatile and unpredictable year in the stocks market. The world’s economy is still recovering from the COVID-19 pandemic. With no sure guarantee of normalcy, some stock markets will fall because the economy remains unstable.
Non-cyclical sectors will prosper amidst the pandemic times. Such sectors include communication, durable companies in the industrial sector, healthcare, consumer staples, and media or entertainment-related tech sectors.