What are Stock Sectors and how can they be used to improve investing performance?

To improve stock market and economic analysis, stocks are divided into groups called stock sectors.

Each stock sector contains businesses that are related to a specific purpose.

On United States stock markets there are approximately 7500 companies that are allocated to these stock sectors.

Think of stock sectors as stock business categories.

Stock Sectors Explained

stock sectors pie chart

stock sectors pie chart

There are numerous methods of allocating stocks to sectors.

Most sector allocations tend to use the Global Industry Classification Standard (CICS).

However, many companies create their own company sector assignment strategy.

Sector investing is improved by using a method to invest in all the stocks that are included in a sector.

To accomplish this Profitable Investing uses the allocation and the resulting ETF’s as defined by State Street Global Advisors (SSGA).

SSGA has created a set of 10 Exchange Traded Funds (ETF) that uniquely represent the 10 sectors of the stock market.

Stock Sector ETFs and Holdings

Sector ETFs and examples of the business focus area are shown below (ETF symbols are in brackets):

Stock Sectors SPDR ETFs

Stock Sectors SPDR ETFs

  • Consumer Discretionary – (XLY) – consumer durables, automobiles, apparel, leisure, restaurants,…
  • Consumer Staples – (XLP) – consumer products more likely to be purchased regardless of the economy, soap, food, beverages, personal items, prescription drugs,…
  • Energy – (XLE) – energy producing companies,…
  • Financial – (XLF) – insurance, diversified financial, banks, consumer finance,…
  • Healthcare – (XLV) – health care equipment providers, supplies & services, pharmaceutical companies,…
  • Indistrials – (XLI) – building products and equipment, aerospace, defense, machinery, commercial services, rail, road, marine, airlines,…
  • Materials (XLB) – chemical producers, containers & packaging, mining, metals, paper & cardboard, construction materials,…
  • Real Estate – (XLRE) – real estate management, development, real estate REITs (not including mortgage REITs),…
  • Technology – (XLK) – computers, computer accessories, internet software, internet services, semiconductor produces, semiconductor production equipment, telecommunication services,…
  • Utilities – (XLU) – production, transmission, distribution of natural gas or electricity,…

How to Evaluate Stock Sectors for Investing Performance

Additional detailed information on all of the above stock sector ETFs can be found on the Sector ETF site.  This site can provide details on company holdings, performance of each sector ETF and more.

Its useful to know the performance of each stock sector.  However, it’s far more useful for profitable investing to understand the balance of supply and demand for each sector.

Stock Sectors Summary Table

Stock Sectors Summary Table

Visit the stock sector summary table for information on the supply and demand for each stock sector and the associated ETF.

For even more details on the supply and demand for each stock sector visit the sector strength charts.