When building a portfolio of equity securities, diversification is a critical consideration. There’s no getting around the fact that stocks fluctuate with the market, the economy, company performance, and other factors.
Since no one can definitively predict how any individual stock will perform, it makes sense to spread out investment risk by owning several stocks encompassing many different industries and covering differing aspects of the economy. One effective method of diversifying a portfolio is to buy and hold stocks from each of the 11 sectors.
These sector designations are called the Global Industry Classification Standard, or GICS. They serve to standardize the organization of stocks. According to the GICS, the 11 economic and industrial sectors are as follows…
This post originally appeared at U.S. News & World Report.