Sector Rotation
> Stock Sectors
Investing in Stock Sectors to Maximize Sector Rotation Returns
In the classic sector rotation model there are 11
key stock sectors that the stock market index is divided into for
investors seeking broad exposure to a single sector. There
are many mutual funds and ETFs available that aim to replicate the
returns of these common sector breakouts. Some funds are better than
others, and you need to look closely at the expense ratios and the
prospectus.
If you know what stage of the business cycle we are in from the
economic clues available in the marketplace, you should be able to
determine which sectors to invest in now.
Overview of the 11 Classic Stock Sectors
Each of the following stock sectors will behave differently in each of
the business cycles and economic cycles we face. Let's
explore each of the 11 popular stock sectors now.
Cyclical / Consumer Discretionary
The Consumer Discretionary Sector includes companies from industries,
such as media; retail (specialty, multi-line, Internet and catalog);
hotels, restaurants and leisure; textiles, apparel and luxury goods;
household durables; automobiles, auto components and distributors;
leisure equipment and products, and diversified consumer services.
Technology
The Technology Sector includes companies from industries, such
as computers and peripherals, software, diversified telecommunication
services, communications equipment, semiconductor and semiconductor
equipment, Internet software and services, information technology
services, electronic equipment, instruments and components, wireless
telecommunication services and office electronics.
Telecommunications
The Telecommunications Sector includes companies in industry groups,
such as fixed-line telecommunications and mobile telecommunications.
Industrial
The Industrial Sector includes companies from industries such as
aerospace and defense, building products, construction and engineering,
electrical equipment, conglomerates, machinery, commercial services and
supplies, air freight and logistics, airlines, marine, road and rail,
and transportation infrastructure companies.
Basic Industry
The Basic Industry Sector primarily consists of companies involved in
such industries as chemicals, construction materials, containers and
packaging, metals and mining, and paper and forest products.
Energy
The Energy Sector consists of companies that primarily develop
and produce crude oil and natural gas, and provide drilling and other
energy-related services.
Staples
The Staples Sector includes companies that are primarily involved in
the development and production of consumer products that cover food and
drug retailing, beverages, food products, tobacco, household products
and personal products.
Utilities
The Utilities Sector includes companies from industries, such as
electric utilities, multi-utilities, independent power producers and
energy traders, and gas utilities.
Finance
The Finance Sector includes companies from industries, such as
diversified financial services, insurance, commercial banks, capital
markets, real estate investment trusts (REITs), consumer finance,
thrifts and mortgage finance, and real estate management and
development.
Heath Care
The Index measures the performance of the healthcare sector of the
United States equity market, and includes companies in industry groups,
such as healthcare equipment and services, pharmaceuticals and
biotechnology.
Next up: Sector Rotation Funds
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