A sector refers to a collection of companies and institutions that develop and sell similar types of products and services. Categorizing the economy by different sectors allows economists and analysts to evaluate the economic activity within those particular areas.
According to the Global Industry Classification Standard (GICS), there are 11 different stock market sectors: Energy, Materials, Industrials, Utilities, Healthcare, Financials, Consumer Discretionary, Consumer Staples, Information Technology, Communication Services, and Real Estate.
Sectors are important to consider when building a stock portfolio as experts advise new investors to diversify and include companies from different sectors. Investors also choose from sectors in which they have a high interest, which improves their decision-making process.
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