Sector diversification
What’s sector diversification? and why it’s important?
What’s diversification?
Diversification is strategy use to minimize risk by having a portfolio made up of assets or sectors or regions.
Asset diversification – instead of investing in singular stocks, invest in different asset classes which is a group of investment that share similarities and are subject to the same regulations and laws.
What’s sector Diversification
Sector diversification is a strategy use to minimize risk within a portfolio that is constructed by different sectors.
Why is sector diversification important?
Sector diversification is important because each sector can be affected differently. When an event occur one sector could go up while another sector could go down.
There are a total of 11 sectors In the stock market
- Tech (IT) – Information Technology
- Financials
- Health care
- Industrials
- Communication services – Telecommunication services
- Consumer discretionary
- Consumer staples
- Utilities
- Energy
- Materials
- Real Estate (REITs)
Example by investing in a S&P 500 is like investing in 11 sectors.