Dec 17, 2021
Explaining the 11 Sectors of the Economy
The economy can be broken down into industries, such as real estate and consumer staples.
The economy is made up of 11 sectors.
These sectors are broad classifications of business activity that can include multiple industries. Each sector of the economy has its function. The consumer staples sector, for example, produces everyday products people need no matter the economic cycle, such as food and toothpaste. In contrast, the consumer discretionary sector includes products that aren’t technically necessary, but that people may use when the economy is flush with cash, for example travel and hotel stays, as well as new cars or bicycles. The real estate sector facilitates the construction and sale of the homes and buildings where people work and live.
As an investor, it’s important to know about the sectors of the economy, because they can help you diversify your portfolio. Diversification means using your money to invest in many different types of holdings that are not all subject to the same market risks. One way you can diversify is by investing in different sectors of the economy, which might not all react to market changes in the same way, which can protect you from volatility.
Here’s Stash’s guide to the sectors of the economy*:
All About Consumer Discretionary Stocks
We all have necessary expenses, like food and shelter. And then there are the things you don’t necessarily need, but that you buy anyway to make your life better or more enjoyable.
Consumer Staples: Find Out About Defensive Stocks
Groceries, soft drinks and snack foods, toothpaste and toilet paper, laundry soap and pet food—you probably buy at least some of these every week without even thinking about it.
How the Energy Sector Powers Cars, Businesses, and Homes
The energy sector makes it possible for you to drive your car, turn on your air conditioner, and so much more.
What the Financial Services Sector is All About
You go to the bank to put money in your savings account, to make a withdrawal, to apply for a loan, and more. But banks aren’t just places where you store your cash.
How the Health Care Sector Provides Essential Services, and Powers the Economy
When you go to a doctor’s appointment, get an X-ray, or pick up a prescription, you’re engaging with the health care sector of the economy.
Why the Industrial Sector can be Critical to the Economy
The industrial goods sector, also known as the industrial sector, includes companies that make and sell tools and products used by other industries.
How the Materials Sector Can Provide the Essentials for Other Industries
The materials sector includes the production and distribution of raw materials such as paper, plastic, glass, chemicals, metals and more.
Here’s How You Can Invest in the Real Estate Sector, a Crucial Part of the Economy
The real estate sector includes the homes and apartments where people live, the stores where they shop, and the offices where they work.
Technology (Communications and IT)
What’s the Tech Sector?
In today’s world, it’s hard to imagine getting through the day without smartphones, computers, and even smartwatches or speakers that talk back to you. These products are all part of one of the most innovative sectors in the economy: technology.
Why The Utilities Sector Is Essential to The Economy
The utilities sector includes infrastructure companies that supply water, produce natural gas and electricity, process sewage, and more.
*Note: Technology consists of both the communications services sector and the information technology (IT) sector.
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