A Guide to The 11 Different Segments of The Stock Market and How They Operate

If you’re a stock market investor looking to broadly diversify your portfolio, it’s essential to own stock in companies across various parts of the economy. The economy is divided into sectors, which group together stocks with similar business characteristics.

The Global Industry Classification Standard (GICS) categorizes the market into 11 sectors, consisting of 25 industry groups and 74 industries, as of May 2024. This widely-used system guides the construction of ETFs and mutual funds.

Here’s a breakdown of how GICS works and its 11 sector classifications, including some leading companies in each.

The GICS system serves as the foundation for categorizing groups of companies, influencing the creation of sector-based index funds and determining which companies are included or excluded from various indices. Developed in 1999 by MSCI and Standard & Poor’s, two financial industry leaders, GICS divides companies into several levels of granularity:

  • Sectors
  • Industry groups
  • Industries
  • Sub-industries

Periodically, the GICS system undergoes revisions to accommodate the growth and evolution of industries. For instance, real estate was introduced as the newest sector classification. Real estate companies and REITs were shifted from the financials sector to form their own separate sector in 2016, reflecting the sector’s increasing significance. This reclassification had a notable impact on the market, leading to increased investment in real estate stocks as fund managers adjusted their portfolios to match the new sector weightings.

Changes in GICS classifications or company inclusions/exclusions can trigger significant buying or selling activity in affected stocks, potentially influencing a company’s access to funding.

An alternative to GICS is the Industry Classification Benchmark (ICB), introduced in 2005 by Dow Jones and FTSE. The ICB categorizes the market into 11 industries, 20 supersectors, and further divides them into sectors and subsectors. Widely used by exchanges like NASDAQ and NYSE, as well as international markets, the ICB provides another framework for organizing industries and companies.

Here are the 11 GICS sector classifications, along with a brief description of the companies within each sector and some prominent examples. Additionally, a recommended index fund with a low expense ratio for investing in each sector is provided:

The energy sector comprises firms involved in oil and hydrocarbon exploration and production, refining, oil and gas transportation, and equipment manufacturing. Typically mature with moderate growth.

  • Key companies: Chevron, ExxonMobil, Halliburton
  • Recommended ETF: Vanguard Energy ETF (VDE

The materials sector encompasses firms involved in chemical production, glassmaking, paper manufacturing, forestry products, metal production, packaging, construction materials, and steel. Typically, it’s a mature industry with modest growth potential.

  • Key companies: Dow, DuPont, Sherwin-Williams
  • Recommended ETF: iShares Global Materials ETF (MXI)

The industrials sector comprises companies engaged in manufacturing aerospace and defense products, electrical equipment, construction equipment, as well as those providing security, employment, professional, and transportation services. This sector tends to exhibit robust growth during economic upswings.

  • Prominent companies: 3M, Caterpillar, Delta Air Lines
  • Recommended sector ETF: Vanguard Industrials ETF (VIS)

The consumer discretionary sector encompasses companies involved in manufacturing cars, durable goods, clothing, leisure equipment, as well as operating restaurants, hotels, and retail outlets. This sector’s performance is closely tied to economic cycles, with accelerated growth during economic expansions and amplified slowdowns during contractions.

  • Leading companies: Amazon, Ford Motor Company, Home Depot
  • Recommended sector ETF: Vanguard Consumer Discretionary ETF (VCR)

The consumer staples sector comprises companies involved in the production of food, beverages, tobacco, and non-durable household goods, along with retail outlets selling food, drugs, and other essential items. Typically mature, this sector exhibits modest growth.

  • Prominent companies: Coca-Cola, Procter & Gamble, Walmart
  • Recommended sector ETF: Consumer Staples Select Sector SPDR Fund (XLP)

The health care sector encompasses companies offering health care services, along with those specializing in health care equipment and technology. It spans all stages of pharmaceutical and biotech research, development, and production. Known for its dynamism, this sector often sees above-trend growth, with several rapidly expanding companies.

  • Notable companies: Pfizer, Johnson & Johnson, UnitedHealth
  • Recommended sector ETF: Vanguard Healthcare ETF (VHT)

The financials sector comprises companies engaged in banking, mortgage and consumer finance, investment banking, brokerage, and insurance. While known for robust growth and profitability, it can be heavily influenced by interest rate trends, leading to cyclical patterns.

  • Notable companies: Bank of America, Berkshire Hathaway, JPMorgan Chase
  • Recommended sector ETF: Financial Select Sector SPDR Fund (XLF)

The information technology sector encompasses firms involved in software development, IT services, and hardware manufacturing, including communication devices, computers, and semiconductors. Known for rapid growth, it houses some of the market’s largest enterprises.

  • Key companies: Apple, Microsoft, Nvidia
  • Recommended sector ETF: Vanguard Information Technology ETF (VGT)

The financials sector encompasses firms involved in banking, mortgage and consumer finance, investment banking, brokerage, and insurance. While known for robust growth and profitability, it can be heavily influenced by interest rate trends, leading to cyclical patterns.

  • Key companies: Bank of America, Berkshire Hathaway, JPMorgan Chase
  • Recommended sector ETF: Financial Select Sector SPDR Fund (XLF)

The utilities sector comprises companies offering electricity, gas, and water, sourced from both conventional and environmentally friendly sources. It also includes energy traders and distributors. Typically, this sector is known for steady performance rather than rapid growth, although investments in “green” energy may offer higher returns with increased risk.

  • Notable companies: Dominion Energy, Duke Energy, NextEra Energy
  • Recommended sector ETF: Utilities Select Sector SPDR Fund (

The real estate sector encompasses real estate services firms, developers, and equity REITs (Real Estate Investment Trusts). While it may present robust growth prospects, its growth is generally stable.

  • Notable companies: American Tower, Public Storage, Simon Property Group
  • Recommended sector ETF: Vanguard Real Estate Index Fund (VNQ)

Having insight into a company’s sector classification aids in portfolio diversification, ensuring inclusion from various sectors. Moreover, it’s vital to recognize that larger companies may operate across multiple sectors or industries. While a company may fall under one classification, its operations could extend to others. Hence, grasping the comprehensive scope of a company’s activities is crucial, rather than fixating solely on its classification.