The 12 Stock Market Sectors, Explained (And Why They Matter)

If you’ve been following the news lately, it’s pretty obvious that tech is getting all the attention at the moment.

We’ve covered AI spending battles between the US and China, trillion-dollar swings in big tech, India’s massive AI infrastructure push, and how everything from jobs data to inflation feeds straight into tech valuations.

And “technology” is a perfect example of a stock market sector.

We talk a lot about tech stocks these days. But even though AI and software companies are getting most of the attention right now, a long-term portfolio usually shouldn’t be only tech.

If you want to diversify and limit risk (which is the whole point for most long-term investors), you typically want exposure to a bit of everything.

So… what are sectors, how many are there and what does it mean for you portfolio?

Let’s dive right in.

What are sectors and industries?

Think of the stock market as a big supermarket:

• Sectors are the big aisles: “Health”, “Food”, “Energy”, “Finance”, “Tech”.
• Industries are the shelves inside an aisle: within “Tech” you’ll find narrower buckets like software, semiconductors, IT services, and so on.

Most classification systems are hierarchical: companies get grouped into sectors, then industries, and often even smaller sub-industries, based on what they mainly do.

How many sectors are there?

The most widely used global standard is GICS (Global Industry Classification Standard), built by MSCI and S&P Dow Jones. It uses 11 sectors.

In Playvest, we also show a 11-sector view (based on a Morningstar-style sector breakdown), and we list them all so you can quickly see what you’re exposed to.

The 11 sectors (as you’ll see them in Playvest)

Here’s the 11-sector breakdown, with examples of what tends to sit inside each one:

Cyclical (tends to move more with the economy):

• Basic Materials: Companies producing raw materials like chemicals, metals, mining, paper
• Consumer Cyclical: Non-essentials tied to the economy: retail, autos, travel, luxury goods, media.
• Financial Services: Banks, insurers, asset managers, exchanges, and other firms that manage and move money.
• Real Estate: REITs and property-related businesses like developers, operators, and real estate services.

Defensive (tends to hold up better in downturns):

• Consumer Defensive: Everyday essentials: groceries, household products, beverages, and staples people buy in downturns.
• Healthcare: Pharmaceuticals, medical devices, biotech, hospitals, and health services focused on treatment and care.
• Utilities: Providers of electricity, gas, water.

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Sensitive (in-between; moderately tied to the economic cycle):

• Communication Services: Telecoms plus media and interactive platforms
• Energy: Oil, gas, coal, renewables
• Industrials: Manufacturers and service providers: aerospace, transport, machinery, construction, and business services.
• Technology: Software, hardware, semiconductors, and IT services powering digital products and infrastructure.

And within each of these sectors?

There are many industries (and often sub-industries), which is why two stocks can both be “in Tech” but behave totally differently.

Understanding sector risk

Sector risk is basically this: when something hits a sector, it often hits many companies in that sector at the same time.

A few common examples:

• Tech / software can be extra sensitive to interest rate changes, competition, and rapid innovation cycles.
• Energy can swing with commodity prices and geopolitics.
• Financials can be tied to the health of the economy, credit defaults, and interest rate dynamics.
• Utilities tend to be steadier (people still use power in a downturn), but can be sensitive to regulation and rates.

This is why “I own 20 stocks” doesn’t automatically mean you’re diversified. If 15 of them are in the same sector (or even the same industry), you can still be taking one big, concentrated bet.

Diversification is key

Diversification is just a practical way of saying:

If one part of the economy has a bad year, you don’t want your entire portfolio to go down with it.

Spreading across sectors can help you:

• avoid over-relying on one theme (like “AI will keep winning forever”),
• reduce the impact of sector-specific shocks,
• and build a portfolio that’s more resilient across economic cycles.

That’s exactly why seeing your sector exposure in Playvest is useful: it turns diversification from a vague goal into something you can actually check.

Long-term strategy always wins

Sectors and industries are a way to understand what you truly own and what risks you’re accidentally concentrating.

Trends come and go. Headlines rotate.

But the long-term investor’s edge is usually the same: stay diversified, stay consistent, and avoid building a portfolio that depends on one sector being “the main character” forever.