For those who have decided to start investing this year, the choice of assets may seem overwhelming. A good starting point is to understand the current situation across different industries.
The S&P 500 index, which is considered one of the main benchmarks in the American stock market, comprises 11 sectors. While the performance of individual company stocks varies, each sector as a whole exhibits distinct characteristics that can indicate whether investments will be successful or unsuccessful over specific periods.
Here are some of the sectors that have been most successful recently.
Technology Sector
Weight of companies in the S&P 500: 27.6%
Total return from 2005 to 2020: 672%
Major companies: Apple, Microsoft, Taiwan Semiconductor, NVIDIA, Adobe.
This sector has delivered the best results over the past 15 years, particularly in the last couple of years when it has more than doubled in growth.
Consumer Goods
Weight of companies in the S&P 500: 12.7%
Total return from 2005 to 2020: 468%
Major companies: Amazon, Tesla, Alibaba, The Home Depot, Nike.
Companies in this sector are quite resilient. Even during crises, they maintain profitability due to customer loyalty and popularity. For instance, during the pandemic-related restrictions, people ended up spending even more on consumer goods than before.
Industrial Companies
Weight of companies in the S&P 500: 8.4%
Total return from 2005 to 2020: 293%
The industrial sector has yielded profits of around 300% since 2005. In fact, it is more balanced than often assumed. These assets are attractive due to good dividends and tend to be less volatile compared to other sectors, such as energy, commodities, and finance.
Energy
Weight of companies in the S&P 500: 2.3%
Total return from 2005 to 2020: 59%
The energy sector performed best in 2005, 2007, and 2016; however, 2020 marked the third consecutive year of poor results for energy companies. It's worth noting that this is especially true for U.S. energy firms, while the Russian oil and gas sector finds itself in a more stable condition.
Regardless, even considering all the negative factors, the decline in stock prices presents additional opportunities for investors willing to take risks in 2021.
