Zone designated area. A field of activity. Origin of sector. Sector Sentence Examples. If only he didn't have to tour the Sector tonight! Related articles. Also Mentioned In. The risks of loss from investing in CFDs can be substantial and the value of your investments may fluctuate. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
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These distinctions are made according to industry or sector. There are multiple ways to classify businesses by sector. Some economists like to divide businesses according to corporate, nonprofit, and government organizations. More often, the economy is divided into three sectors: the primary, secondary, and tertiary sectors.
The only problem with this classification system is that it precludes the fourth sector, including government agencies and agencies that are government-controlled. The primary sector acts as a foundation for all other businesses. It creates the raw materials that go on to support every other sector. Industries that fall within the primary sector include:. In developing countries, the primary sector constitutes a large part of their economy.
In the United States, the economy continues to see a gradual shift from the primary sector to the secondary and tertiary sectors, due to advancements in technology. Once the primary sector produces raw materials, the secondary sector transforms them into various products. The secondary sector includes the manufacturing industry, comprising a significant portion of the United States workforce. The quaternary sector includes companies engaged in intellectual activities and pursuits.
The quaternary sector typically includes intellectual services such as technological advancement and innovation. Research and development that leads to improvements to processes, such as manufacturing, would fall under this sector. The companies and firms within the quaternary sector had been traditionally part of the tertiary sector. However, with the growth of the knowledge-based economy and technological advancements, a separate sector was created.
Firms within the quaternary sector use information and technology to innovate and improve processes and services, leading to enhancements in economic development. Firms within the quaternary sector might be engaged in the following business activities:. In the financial markets, the economic sectors are broken down into sub-sectors to help investors compare companies with similar business activities.
While economic sectors represent a broad representation of the economy, investment sectors further define and categorize companies. Investment sectors are important because they help measure how well an economy is performing based on the financial performance of the corporations within that sector.
The list below does not represent an exhaustive list, but here are some examples of investment sectors:. Investors use sectors to group stocks and other investments into categories that share unique characteristics. Investment sectors can provide insight as to how an economy is performing and which areas of the economy are performing better than others. If there is a large increase in the purchase of raw materials, such as copper or crude oil, it may be an indication that the economy is expanding.
In other words, in an expanding economy, businesses and consumers tend to use more raw materials and energy since consumer and business spending is on the rise. Industrials would also perform well in an expansionary economy since increased economic growth typically leads to an increase in manufacturing and construction. Similarly, real estate, such as commercial real estate and housing, might also experience an increase in sales and development.
If consumer confidence is high, consumers might increase their purchases of non-essential goods, leading to a rise in consumer discretionary spending. As a result, companies within sectors that benefit from an expanding economy would likely experience increased revenue. Conversely, if an economy is performing poorly or there are expectations that economic growth will slow in the coming months, companies that sell consumer staples often experience an increase in revenue.
The reason for this correlation between a slowing economy and consumer staples stocks is that consumers will likely continue to purchase essential products, such as paper towels and toilet paper, even in periods of negative or slowing growth.
Also, investment sectors may represent a specific risk profile that may or may not attract investors. For example, in a slowing economy, investment in the utilities sector tends to increase since those stocks are considered safe-haven investments. Understanding economic sectors and the activity driving growth within those sectors can help investors determine which sub-sectors and their stocks will be impacted.
It is common for investment analysts and other investment professionals to specialize in certain sectors. For example, at large research firms, analysts may cover just one sector, such as technology stocks. Additionally, investment funds often specialize in a particular economic sector, a practice known as sector investing. These funds contain a basket of stocks or securities within a particular industry or sector. For example, the energy sector, particularly the oil and gas industry, is a large industry that attracts specialized investment funds.
While a sector represents a large segment of an economy that includes many companies, an industry represents a more narrow focus of the companies within a particular sector. Thus, industries are the result of breaking down a sector into more defined and specific groupings. On the other hand, sectors can represent a large grouping of companies that have similar business activities.
Sectors may have companies that don't necessarily compete with each other, while industries tend to represent corporations that are in direct competition.
For example, companies within the oil and gas industry, such as Exxon and Chevron, are competitors.
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