Sector definition

Sector

A sector is a division within a market or economy used to group companies with similar outputs and analyze their performance. Sectors can be used to categorize small economies like that of a single city or larger, nationwide economies.

Examples of various sectors include agriculture, transportation, education, retail, and financial services. It is considered best practice for traders and investors to split their portfolios among multiple sectors in a process called diversification. This protects their portfolio if one sector underperforms.

How to invest in a sector

You can invest in or trade whole sectors with specific indices consisting of similar companies of a single sector or through exchange-traded funds (ETFs) focused on specific sectors. This may be useful if you want to invest in an entire sector without allocating your whole portfolio to that sector.

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