By learning about the various stock market sectors, investors can gain a greater understanding about diversification options and how the market is categorized. Find out how many sectors classifications there are in U.S. markets and what's important for investors to know about each of them.
What Are Stock Market Sectors?
A stock sector is a collection of publicly-traded companies that work within the same general field of business—healthcare, energy, real estate, etc. The stocks in each sector, in turn, carry similar characteristics.
How Many Sectors Are in the Stock Market?
There are 11 stock market sectors, according to the Global Industry Classification Standard, or GICS, which is an industry taxonomy developed in 1999 by MSCI and Standard & Poor's. Within the entire GICS structure, there are 11 sectors, 24 industry groups, 69 industries and 158 sub-industries into which all major public companies are categorized.
The 11 GICS stock market sectors are as follows:
- Healthcare Sector
- Materials Sector
- Real Estate Sector
- Consumer Staples Sector
- Consumer Discretionary Sector
- Utilities Sector
- Energy Sector
- Industrials Sector
- Consumer Services Sector
- Financials Sector
- Technology Sector
11 Stock Market Sectors: List & Explanation
1. Healthcare Sector
The healthcare sector consists of stocks of companies involved in a range of health-related industries, including but not limited to:
- Pharmaceutical producers
- Medical devices
- Healthcare service providers
- Biotech stocks
- Insurance companies
Examples of large healthcare companies include UnitedHealth Group (UNH) and Pfizer (PFE).
2. Materials Sector
The materials sector includes businesses involved in the manufacture of:
- Construction materials, chemicals, paper, and glass
- Companies specializing in making paper and forest products
- Metals and mining companies
Some of the largest materials companies in the world include DuPont (DD) and The Sherwin-Williams Company (SHW).
3. Real Estate Sector
The real estate sector includes companies that develop or manage real estate property. This sector also includes real estate investment trusts (REITS), which are companies that purchase multiple income-producing assets, such as office buildings and hotels.
Some of the largest real estate companies include American Tower Corp. (AMT) and Simon Property Group (SPG).
Seeking Alpha analysis on REITS can be found here.
4. Consumer Staples Sector
The consumer staples sector includes companies involved in food, beverage, and tobacco, as well as producers of household goods and personal products. Since these are goods and services that consumers need, regardless of their current financial condition, consumer staples is considered to be a defensive sector (i.e. recession-proof industries).
The largest consumer staples companies include Walmart (WMT), Procter & Gamble (PG), and The Coca-Cola Company (KO).
5. Consumer Discretionary Sector
The consumer discretionary sector, also known as consumer cyclicals, includes companies involved in:
- Retail
- Ecommerce
- Hotel
- Luxury goods
- Leisure and travel industries
In contrast to consumer staples, these goods and services are generally those that consumers don't necessarily need to have.
The largest consumer discretionary stocks include Amazon (AMZN), Tesla (TSLA), and Home Depot (HD).
6. Utilities Sector
The utilities sector includes companies that provide customers with utility services, such as water, electric, and gas. Since utilities are considered to be essentials for daily living, the utilities sector is also generally seen as a defensive sector.
Some of the largest utilities companies include NextEra Energy (NEE), Duke (DUK), and The Southern Company (SO).
7. Energy Sector
The energy sector comprises businesses involved in the exploration, production, refining, and sale of energy resources, including oil and natural gas, as well as companies that service these industries.
The energy sector includes some of the largest energy companies in the world, such as Exxon Mobil (XOM) and Chevron (CVX).
8. Industrials Sector
The industrials sector may include businesses that are involved in a wide range of industries, including:
- Industrial machinery construction and engineering
- Aerospace and defense
- Electrical equipment
Some of the largest industrial companies in the world include Boeing (BA), Honeywell (HON), and Union Pacific (UNP).
9. Communication Services Sector
The communication services sector includes telecommunication service providers, such as:
- Wireless telecom networks
- Media and entertainment companies: older radio and television companies
- Newer interactive media and internet companies
Examples of large communication services companies include Alphabet (GOOG) and AT&T (T).
10. Financials Sector
The financials sector includes a wide range of financial companies, including:
- Investment banks
- Commercial banks
- Insurance companies
- Financial service providers
- Asset management companies
- Financial brokers
The financial sector includes some of the largest financial companies in the world like Visa (V), JPMorgan Chase (JPM), and Bank of America (BAC).
11. Technology Sector
The technology sector includes multiple sub-sectors and industries, from semi-conductor producers to software and hardware providers, as well as internet stocks and cloud computing.
The sector includes companies with some of the largest market capitalizations in the world, such as Apple (AAPL), Microsoft (MSFT), and Amazon (AMZN).
How To Invest In Sectors of the Stock Market
Investors can gain exposure to market sectors in a number of ways, including:
- Purchasing of individual stocks within a given sector
- Buying specialized sector funds: exchange-traded funds ((ETFs)) or mutual funds that primarily hold stocks within a single sector.
Investors interested in exposure to all sectors can consider a broad-based mutual fund or ETF like the SPDR S&P 500 Trust ETF (SPY).
Bottom Line
There are 11 stock market sectors, as classified by GICS, which stands for Global Industry Classification Standard. These sectors include healthcare, materials, real estate, consumer staples, consumer discretionary, utilities, energy, industrials, consumer services, financials, and technology.
Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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