Stock Market Sectors

The stock market is split into various sectors, that lumps together the businesses that operate in that sphere, or sector.

This makes intuitive sense because you often want to compare like with like, and if you want to find out how well a company is doing then comparing it to rivals in the same sphere of activity makes much more sense: why compare a supermarket with a bank when you can compare it with another supermarket for instance.

And so the indices are split into various sectors: such as Mining companies together, Banking companies together and so on and so forth.

If you are interested or have detailed knowledge on a particular sector as a first time investor then that may be intuitively the one that appeals to you most to dip your toe into. For instance if you work in banking then you may feel you know the sector well and the strengths, weaknesses of the various companies. The stock market always has one eye on the future so if you are confident about the fortunes of a particular company, then that can seem a compelling reason to invest, always bearing in mind that you might be wrong or something unforeseen can happen to scupper the best made plans.

It is a good idea when you start investing to look at all the different sectors, and if you are unfamiliar with a sector to do a little research and find out about the sort of companies that make up that sector. Even if you have no intention to invest in that sector, it can be both interesting and educational to find out more about each sector and the particular quirks it has. For instance companies in some sectors will tend to pay much higher dividends than companies in some other sectors, and so knowing this may influence your decision when it comes to compiling a balanced portfolio and which sectors you decide to pick stocks from to make up that portfolio.

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