Sector Breakdown

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Definition: Sector Breakdown

Within a fund or portfolio the mix of sectors is mostly as a percentage of the equities asset class. Depending on the criteria being used the sector designations may vary slightly. The most common equity sectors are:

• Financials

• Technology

• Consumer durables

• Basic industrial materials

• Consumer cyclical

• Healthcare

• Utilities

• Energy

By sector we mean broader scope for industries, many modern companies are counted within more than one different sectors. Over short & medium term time periods same sector companies tend to have mostly relatively high correlations for their rate of stock price performance, revenue and earnings growth and earnings forecasts.

A portfolio consisting of stocks across most sectors is called a diversified stock portfolio. Composition of the S&P 500 broad index, gives the market weightings of sectors. Thus analysis of portfolio across different sectors. It shows the percentage of total fund that is allocated by investors in different sectors of the economy, for example healthcare, energy and consumer goods.

For example the S&P Sector Breakdown even points out unbalanced portfolios to the investors because of the indexes concentration being more on some and low for the rest. The Figure shows that maximum percentage of fund is allocated to Materials, financials and energy, whereas other sectors such as consumer goods, telecom and industrials are not getting enough market exposure.

The sector breakdown helps investors to decide which sector they want to fund based on an experience that the sector is going to see a period of strong growth. Sector fund can also serve as to hedge a portfolio, because some sector always tends to move in opposite direction. The decision works on 3 factors:

• Finding the sectors that are promising

• Finding out those which are currently doing well

Finding out those that are doing too well and is going to face a bloom



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