The 11 Sectors of the Stock Market and What Will Do Well in 2021

For those who are active investors in the stock market, everyone knows that there are literally thousands of names to choose from. From popular names such as Apple and Walmart to less known small company names like Renewable Energy Group and Canopy Growth, there are many places to put your money in the hopes these companies will make you money in the long term.

With all these names, investors like to find ways to organize these companies into groups so that they can monitor equivalents. For example, it makes little sense for an investor to compare a company like Apple with a company like Home Depot because they focus on two completely different sectors of the market. Thus a system is needed to divide these names by industry type.

The stock market can be divided in many ways and many different subgroups, but essentially, there are eleven sectors that the market is primarily divided into some may seem more obvious than others, but these are where investors are able to use industry comparison metrics such as price to earnings ratios and assess the division of market share to establish price targets. So here are the eleven sectors based on the Global Industry Classification Standard (GICS).

Energy

Although energy takes on many forms, this sector really only focuses on the pure oil and gas plays in the energy industry. Any mention of renewable or alternative energy companies will usually be placed in utilities.

Materials

Material is a sector that focuses on the production of raw materials or chemicals that can be produced and support the manufacturing companies that generally fall under the industrial sector.

Industrials

Industrials not to be mistaken with materials is the primary manufacturing and service sector of the economy. This includes both transportations that can move goods, as well as major manufacturers that take raw materials and make many products.

Utilities

The utility sector focuses heavily on names that generate, supply, and distribute energy across the world. This can also refer to renewable or alternative energy companies that may not otherwise fit under the energy sector.

Healthcare

Healthcare, although a very broad sector, comprises two main subsectors that define any company heavily involved in the medical services and equipment parts of the economy. Many of the healthcare names that are publicly traded focus either on healthcare supplies and equipment, or the biotech communities.

Financials

Financials is a pretty straightforward sector as its any institution that would be involved in the day-to-day movement of money in the economy. The most obvious example would be the bank stocks such as common names like Bank of America and JPMorgan, but this also can include insurance, consumer finance, and a few real estate investment trusts.

Consumer Discretionary

Consumer discretionary comprises many of the popular names that deal with direct consumer interaction of providing goods and services. This includes retail like Walmart, e-commerce like Amazon, and restaurants like McDonald’s. Although it’s not a perfect fit, the GICS tries to put companies in this category that supply what is considered more discretionary supplies to consumers.

Consumer Staples

Contrary to Consumer Discretionary, companies in the Consumer Staples sector tend to align with consumer needs more than wants, based on the modernized living conditions of today’s developed world. This can be companies like Proctor and Gamble that provide toiletries, or grocery stores such as Kroger.

Information Technology

Any companies that deal directly with computerized equipment will generally fall under this category, whether its software, hardware, or cloud computing, you will expect to find names such as Microsoft and Apple in this category.

Communication Services

Kind of related to information technology, communication services focus on companies that provide more of the front-end experience to their customers. Companies like Alphabet and Facebook tend to fall in this category.

Real Estate

Finally, real estate is a unique sector in that many names under this category are defined as Real Estate Investment Trusts (REITs), alternatives to traditional real estate investments. These tend to be popular because, by law, they must disburse 90% of their earnings to their shareholders in the form of dividends.