Market sectors. Now, the market generally classifies companies in different ways, such as the type of business that they're in. Companies in similar industries are grouped together for comparison purposes, and most analysts and financial media call these groupings sectors and you'll often read and hear about performance for specific sectors. Now, in terms of a formal definition, a sector is a part of the economy in which the businesses broadly share, and the keyword there is broadly, the same or related product or service. Now, it could also be thought as a group of companies that share common operating characteristics and dividing an economy into different sectors like this allows us to do more in-depth analysis on the economy and on the sector and on the companies as a whole. It's important to note that sectors are broader than industries, so it's made up of many, many industries within every sector. And generally, most analysts and reporting mechanisms divide companies into 11 different sectors, and we'll dig into those next. Each sector has its own benefits and characteristics, risk profile, and other considerations. And before we invest, before we analyze a company or a sector, it's important to take time to be familiar with each so that we can make more informed decisions. Now, let's dig in deeper to each of these sectors. First, the communication sector. And those are companies that provide entertainment and information through various types of media. And you know, this sector could give an investor exposure to several different investing themes such as increasing demand for broadband and faster internet connections to stream various media or content. Next, consumer discretionary companies. Now these are companies that make goods and services that people may want but don't necessarily need. So think of high definition televisions, new cars, for example, or spending money on family vacations. Companies in this sector tend to see performance closely related to the health of the overall economy and that makes sense. You're not going to spend money on a new car, for example unless you're seeing a robust economy. Now, on the flip side, the next sector consumer staples, these companies are less sensitive to the overall economy because these companies provide goods and services that we use on a daily basis regardless of the state of the economy like food, like clothing, and other personal type products. Next, we have energy, and of course any company that's involved in the exploration or production or transportation of energy related products and healthcare, any company providing medical or healthcare related services or goods. The next major sector being the financial sector, banking, brokerage firms, mortgage firms are all fall into that sector. Next industrials. Here we have companies that manufacture and distribute goods to other industries. Think machinery, aerospace, and defense and other construction related materials. Next to technology sector. Companies that make hardware, software and components. And the technology sector tends to be the most volatile sector. It's the largest sector in terms of marketer capitalization. Next materials, and these are companies that are involved in the manufacturing and the processing of chemicals or plastics or any other major materials. And they tend to be sensitive both to the economy and the price of underlying commodities that are an input in their processes. Next, real estate and a large portion of the real estate sector is made up of REITs, also known as Real Estate Investment Trusts. And lastly, utilities. And this sector tends to generally be the least volatile sector among the 11 and they tend to pay relatively high dividend yields and it involves companies in the production and the delivery of electric power and natural gas, water, et cetera.
