At a basic level, sectors are just slices of the economy that represent groupings of similar companies. Within each sector, numerous sub-sectors and industries also exist. The Global Industry Classification Standard (also known as GICS) is the primary financial industry standard for defining sector classifications. Its hierarchy begins with 11 sectors which can then be broken down into 24 industry groups, 68 industries, and 157 sub-industries.

As a classification system, sectors give us a consistent way to think about the cross-sections of the global economy, and understanding them can potentially give us an edge in the market.

The overall sentiment surrounding a sector can have a significant impact on how an individual stock within it performs. In a top-down approach, you can start by deciding on specific sectors that you want to invest in rather than comparing random stocks individually.

If you don't like the term "sector" you can just think of them as categories.

You can think of a stock sector kind of like a genre of music. They’re overall categories that represent the purpose of the stocks contained within them. In music, you have categories like pop, rock, and classical. In the stock market, sectors get broken down the same way into categories like energy, finance, and healthcare.

To access and trade the different stock sectors you have the choice of investing directly into entire sectors via ETFs or trading individual stocks. The next two posts introduce each individual sector, along with the sector index, ETFs, and a few of the top stocks.

The 11 Market Sectors pt 1
The 11 Market Sectors pt 2

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