One of the ways investors classify stocks is by type of business. The idea is to put companies in similar industries together for comparison purposes.

Using Stock Sectors to Categorize Stocks

One of the most common classification breaks the market into 11 different sectors. Defensive stocks include utilities and consumer staples. They provide a balance to portfolios and offer protection in a falling market. However, for all their safety, defensive stocks usually fail to climb with a rising market for the opposite reasons they provide protection in a falling market: Defensive stocks do exactly what their name implies, assuming they are well run companies.

They give you a cushion for a soft landing in a falling market. Cyclical stocks, on the other hand, cover everything else and tend to react to a variety of market conditions that can send them up or down, however when one sector is going up another may be going down.

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Most of these sectors are self-explanatory. They all involve businesses you can readily identify.

Investors call them cyclical because they tend to move up and down in relation to businesses livestock marketing society of kenya or other influences. Basic materials, nine sectors stock market example, include those items used in making other goods — lumber, for instance. When the housing market is active, the stock of lumber companies will tend to rise.

However, high interest rates might put a damper on home building and reduce the demand for lumber. Stocks sectors are helpful sorting and comparison tools.

This is extremely stock market hours november 22 1963, since one of the ways to use sector information is to compare how your stock or a stock you may want to buy, is doing relative to other companies in the same sector.

You never want to be making investment decisions in a vacuum. Using sector information, you can see how a stock is doing relative to its peers and that will help you understand whether you have a potential winner or loser.

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Search the site GO. Stocks Understanding Stocks Trading Basics Evaluating Stocks Retail Stocks Active Stock Trading. Updated August 06, Articles in This Series Introduction to Stocks Understanding Stock Share Terms Understanding Stock Diversification Understanding Cyclical and Non-Cyclical Stocks Stock Sectors - How to Classify Stocks Making Money with Dividends Understanding Stock Splits What Market Indexes Tell Us Major Stock Exchanges Look into the Future with Stock Market Indexes Back of Main Article.

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