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Finance Dictionary and Glossary of Investment Terms
Sector
Definition 1.
Used to characterize a group of securities that are similar with respect to maturity, type, rating, industry, and/or coupon.
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Definition 2.
A distinct subset of a market, society, industry, or economy, whose components share similar characteristics. Stocks are often grouped into different sectors depending upon the company's business. Standard & Poor’s breaks the market into 11 sectors. Two of these sectors, utilities and consumer staples, are said to be defensive sectors, while the rest tend to be more cyclical in nature. The other nine sectors are: transportation, technology, health care, financial, energy, consumer cyclicals, basic materials, capital goods, and communications services. Other groups break up the market into different sector categorizations, and sometimes break them down further into subsectors.
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Definition 3.
A sector is a part of the economy. Stocks in the same sector tend to be in the same industry, or one very closely related. Mutual funds focused on specific sectors, such as semiconductors, airlines, utilities, retailing, etc., make it relatively easy to invest in any given sector. Sector investing can pay big returns -- semiconductor stocks, for example, have roared ahead of the overall market during the past decade -- but they involve big risks as well. The main problem is a lack of diversification; investing in any one sector means investing in a group of stocks that tend to rise and fall in unison.
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Definition 4.
A particular group of securities that are in the same industry.
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