What is a sector?
A sector is a particular type of Industry that you are able to invest in. A great example of a sector and sub-sectors is Health and Wellness. The sector is Health and Wellness and sub-sectors of Health and Wellness could be medication, weight loss, exercise or many more. Each one is a sector and can be invested in individually. Some examples of stocks that meet these sectors are:
Life Time Fitness Inc. LTM
This particular company builds and operates fitness and exercise equipment and centers. They are a part of the Health and Wellness sector.
Valeant Pharmaceuticals International, Inc. VRX
While this company is also a part of the Health and Wellness sector, it has no correlation with the company above. This is an example of how two companies can be a part of the same sector but can be invested in individually.
There are many sectors in the stock market. Here is a list of some possible sectors you can invest your money into:
Finding the best company in each sector
When you look at your portfolio and realize you need to invest in something new to further diversify your portfolio, you should first do research on what company is leading the way for your sector. A great way to do this is by using a stock screener. Yahoo stock screener allows you to search by industry. You can then use the screener to weed out all of the under-performing companies and purchase the best one you can find.
There is no reason to buy two different companies in the exact same sector. If one oil company is far outperforming another oil company, you are better off putting your money into the better company. Investing in both companies not only does not diversify your money, it also reduces your yields.
Using the stock screener to search by industry along with the criteria to find the best stocks is the best way to ensure you are getting the best company by sector for your money. The ability to diversify your own portfolio by sector by buying the best companies is a very valuable skill and should be utilized by all.
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