What are sectors?

Ryland Goldman - Saturday, May 1st, 2021

Nvidia, Bank of America, and Home Depot are all about $300 billion companies based in the United States that each do different things. To categorize the companies, we use sectors.

There are eleven different sectors divided into sixty-nine industries and over 150 sub-industries. You can view a description of all the industries in this PDF. These sectors are determined by the Global Industry Classification Standard, or GICS. They all are affected by different factors in an economy, and should all be represented in a different amount in every portfolio. Here are the sectors, along with some examples of stocks and industries in them:

Information Technology (Software, Hardware, Semiconductors)
Apple, Microsoft, Nvidia, Intel

Consumer Discretionary (Automobiles, Consumer Durables, Consumer Services, Retail)
McDonalds, Target, Tesla, Nike

Health Care (Health Care Equipment, Pharmaceuticles, Biotechnology, Life Sciences)
Johnson & Johnson, Pfizer, UnitedHealth, Abbott

Financials (Banks, Insuarance, Diversified Financials)
JPMorgan Chase, Bank of America, Goldman Sachs, American Express

Communication Services (Communication Services, Media & Entertainment)
Verizon, Twitter, Walt Disney, Comcast

Industrials (Capital Goods, Commercial Services, Transportation)
UPS, Boeing, 3M, General Electric

Consumer Staples (Food Retail, Food/Beverage Products, Household Products)
Coca-Cola, Procter & Gamble, Colgate-Palmolive, Walmart

Real Estate (Equity REITs, Real Estate Management)

Energy (Energy Equipment, Oil & Gas)
Exxon Mobil, Chevron, Phillips 66, Kinder Morgan

Utilities (Electric, Gas, Water, Multi-Utilites, Renewable Energy)
NextEra Energy, Duke Energy, Southern Co, Pacific Gas & Electric

Materials (Cemicals, Construction Materials, Containers, Mining, Paper)
Linde, Sherwin-Williams, Dow, International Flavors & Fragrances


Cyclical sectors (materials, financials, consumer discretionary, real estate) are sectors that are very sensitive to changes in the economy. The opposite of these are defensive sectors (consumer staples, health care, utilities), which are relatively stable sectors that experience less volatility. Other sectors (communications, energy, industrials, technology) aren't as sensitive to large economic events, but have more volatility than defensive ones.

The larger sectors as of when this is written include technology, consumer discretionary, and healthcare, together making up more than half of the S&P 500 index.

Next: What is diversification?