Ride market trends with diversifed investments

COVID-19 has sent the stock market on a wild ride. Like a roller coaster, it goes up and down, up and down.While some financial experts say it’s a good time to buy shares in solid companies that sank with stay-at-home orders, many folks are afraid to take a chance. One way to reduce risk: Spread investments over various industries or sectors, each representing key areas of the economy. Here are 11 of the most common sectors and how each can be affected by current events:

1.  Communication-Telecommunication . . . Cable companies, Internet service providers, satellite companies, wireless providers, etc. Recurring revenue is steady; but new expenses, taxes, or government regulations can reduce stock value.

2.  Consumer Staples . . . Food and beverage sales usually remain stable, even when the economy flounders, as consumers rarely cut back on basic needs. Higher input costs or crises like contamination can make these markets volatile.

3. Consumer Discretionary . . .Consumer goods and services such as retail sales make up this sector. When spending increases, the economy improves and share prices go up. Inflation and rising interest rates push stock values down.

4. Energy. . . Companies that provide products like oil, gas, sun or wind energy respond to demand. Government policies, weather forecasts, transportation access, competition and shortages of resources affect the price of energy shares.

5. Financials . . . ETFs, banks, insurance, mortgage firms, investment funds.  As interest rates rise, financial firms can make more money and issue more loans. If the Fed reduces financial regulations, this sector also gains, but uncertainty stalls it.

6. Healthcare . . . Bio-tech, medical manufacturers, hospital management agencies, etc. are good defensive investments, as healthcare is always critical. Staff shortages, medical errors or poor patient care end in losses, deadly for stock prices.

7. Industrials .  . . Machinery, fabrication, aerospace, construction, manufacturing, defense. Growth depends on demand and the cost of resources like steel or wood. Skilled worker shortages slow this industry, as well as economic downturns.

8. Materials . . . Mining, chemical, forestry, refining and supply chain industries depend on the rise and fall of prices, as well as the health of the industries they feed. If the demand for gold or silver falls, for example, their value decreases.

9.  Real Estate . . . Industrial and residential real estate, rental income.  Economic environment, major changes in demographics or job opportunities, along with  interest rates, affect real estate growth, declining when the economy lags.

10. Utilities . . . Providers of services like water, electricity and gas. This sector produces steady income for investors, but weather plays a significant role in demand for utilities, as do rises in interest rates for this capital-intensive industry.

11. Technology . . . Technology is the backbone of any industry today. Innovation, technical expertise, product design are all factors that increase the productivity of companies in this industry. Share prices trend upward, unless products fail.     

Manage Your Money . . . financial facts for a brighter future provided by Advancd Asset Management LLC                           Follow our blog: aamllc.com                  Ronald Van Surksum, CFP                4555 Wilson Ave SW – Suite 2               Grandville, MI 49418                             rvansurksum@aamllc.com                 Phone: (616) 531-5220                             Cell: (616) 450-8439                               

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