What it is
Sector investing is a strategy where the specific economic sector of an asset or company is one of the primary considerations for investing.
It aims to benefit from the growth of sectors that may perform well due to certain market trends or opportunities.
This approach often involves buying stocks of companies from specific sectors. You can also consider pooled funds that heavily invest in the sectors you’re interested in.
Some examples of sectors include energy, healthcare, real estate, and information technology. Take note that there are no universal standards for the types of sectors or subsectors you’ll find in an economy.
What it means for you
As an investor, it’s important to know the different economic sectors and their unique challenges and opportunities. This can help you weigh the risks and benefits of investment products since most of them are tied to 1 or more sectors.
Sector investing may also help you strengthen your portfolio through diversification. If you’ll invest across different sectors, you might lessen the risk of loss in case 1 performs poorly.
Some sectors tend to be more sensitive to certain news or economic conditions. There are also sectors that may continue to do well over time no matter what’s happening in the markets or the world.
