The S&P Sectors (2023)

FAQs

Is S&P diverse enough? ›

Generally, yes. The S&P 500 is considered well-diversified by sector, which means it includes stocks in all major areas, including technology and consumer discretionary—meaning declines in some sectors may be offset by gains in other sectors.

Invest Across Asset Classes

Investing only in the S&P 500 limits your portfolio to stocks, which can be a risky decision during major market crashes. Holding bonds, cash, real estate, and other assets can help to limit your risk during these periods.

The best performing Sector in the last 10 years is Information Technology, that granded a +19.15% annualized return. The worst is Energy, with a +4.34% annualized return in the last 10 years. The main S&P 500 Sectors can be easily replicated by ETFs.

The order of the 11 sectors based on size is as follows: Information Technology, Health Care, Financials, Consumer Discretionary, Communication Services, Industrials, Consumer Staples, Energy, Utilities, Real Estate, and Materials.

Almost every institutional investor would like to find an investment manager with a high probability of outperforming the S&P 500. It is widely acknowledged to be one of the most efficient markets and most difficult benchmarks to beat. For a typical pension plan, 35-40 % of all capital is invested in the S&P 500.

The latest SPIVA report is typical: Just 17% of US large-cap stock pickers beat the S&P 500 over the past 10 years through 2021, and that number drops to 6% over 20 years. Time makes a fool of most stock pickers.

Assuming an expense ratio of 0.1% on your index fund (you can find even lower costs now), this means that a $10,000 investment would have turned into just over $760,000 as of Feb.

It's never a good idea to place all your savings in any single investment, even one with as much appeal as an S&P 500 index fund.

Legendary investor Warren Buffet once said that all it takes to make money as an investor is to 'consistently buy an S&P 500 low-cost index fund. ' And academic research tends to agree that the S&P 500 is a good investment in the long term, despite occasional drawdowns.

Which sectors outperform during inflation? ›

Several asset classes perform well in inflationary environments. Tangible assets, like real estate and commodities, have historically been seen as inflation hedges. Some specialized securities can maintain a portfolio's buying power including certain sector stocks, inflation-indexed bonds, and securitized debt.

The best sector funds have historically focused on industries like technology, health care, and consumer discretionary goods and services. There's no way to time the market or guarantee that you will beat its average returns in the long run, so always invest with caution.

There are three main defensive sectors: Utilities, Consumer Staples, and Health Care.

The S&P 500 could approach or exceed the 10,000 level by the early to mid-2030s. Many investors take it as a given that—since returns on the S&P 500 have been strong for 10-plus years—stocks are expensive and over-owned.

Buffett handily topped the S&P 500 for nearly 40 years after he took control in 1965 when Berkshire was much smaller and his stock-picking was phenomenal. It has gotten tougher over the past two decades, but Buffett and Vice Chairman Charlie Munger think Berkshire can outperform in the years ahead.

The chief investment strategist at Leuthold predicts the S&P 500 will hit 5,000 in the coming 12 months, a far more bullish call than any provided by the strategists Bloomberg regularly surveys.

Many traders don't follow their plan due to their emotions. When their trade starts going in a negative trajectory, people will place their stop-loss lower in hope that their trade will bounce back up. Traders need to know that it takes time to estimate trades before initiating them.

“The biggest reason active traders lose money is overtrading, the low brokerage doesn't help," Kamath said.

Can you consistently beat the S&P 500? ›

Yes, you may be able to beat the market, but with investment fees, taxes, and human emotion working against you, you're more likely to do so through luck than skill. If you can merely match the S&P 500, minus a small fee, you'll be doing better than most investors.

If you invested $100 in the S&P 500 at the beginning of 1930, you would have about $574,655.93 at the end of 2023, assuming you reinvested all dividends. This is a return on investment of 574,555.93%, or 9.75% per year.

S&P 500: $100 in 1990 → $2,391.06 in 2023

This is a return on investment of 2,291.06%, or 10.07% per year. This lump-sum investment beats inflation during this period for an inflation-adjusted return of about 935.37% cumulatively, or 7.32% per year.

S&P 500: $100 in 1980 → $11,106.63 in 2023

This lump-sum investment beats inflation during this period for an inflation-adjusted return of about 2,932.07% cumulatively, or 8.24% per year. If you used dollar-cost averaging (monthly) instead of a lump-sum investment, you'd have $9,552.94.

When most people think about average market returns, those are the commonly cited numbers that they expect to achieve. At an 8% rate of return, $100,000 would turn into $1,000,000 after 30 years. If you have 30 years and $100,000, then there's a good chance that the S&P 500 can make you a millionaire retiree.

The conservative, risk-averse investor might be comfortable with a 60% stock and 40% bond allocation. A more aggressive investor in their 40s might be comfortable with an 80% stock allocation.

Key Points. S&P 500 ETFs are a relatively safe investment. However, they can still earn substantial returns over time. By investing consistently, it's possible to build a million-dollar portfolio.

Experts agree that for most personal investors, a portfolio comprising 5 to 10 ETFs is perfect in terms of diversification. But the number of ETFs is not what you should be looking at. Rather, you should consider the number of different sources of risk you are getting with those ETFs.

The S&P 500 is a stock market index made up of about 500 publicly traded companies. You cannot directly invest in the index itself. You can buy individual stocks of companies in the S&P 500, or buy an S&P 500 index fund or ETF. Index funds typically carry less risk than individual stocks.

Basic Info. S&P 500 10 Year Return is at 161.9%, compared to 162.1% last month and 221.7% last year. This is higher than the long term average of 112.3%.

What sectors are still undervalued? ›

By sector, communication services and real estate are the most undervalued sectors today, trading 30% and 22% below our fair values, respectively. Consumer defensive stocks, meanwhile, are about fairly valued.

The decline of Pfizer, by far the worst-performing stock of 2023 with a market capitalization over $100 billion, comes after the company said it expected sales for its Covid-19 vaccine and oral treatment will slip 60% in 2023, and headline an onslaught for several big pharmaceutical companies, with peers Johnson & ...

Generally, the industries known to fare better during recessions are those that supply the population with essentials we cannot live without that. They include utilities, health care, consumer staples, and, in some pundits' opinions, maybe even technology.

Sectors that are also very vulnerable to the rising rates are broadcasting and media, technology, and telecommunications. Those sectors are very leveraged, and those levels of indebtedness, in combination with the rising interest rate environment, will continue to increase their cost of borrowing.

Financials First

The financial sector has historically been among the most sensitive to changes in interest rates. With profit margins that actually expand as rates climb, entities like banks, insurance companies, brokerage firms, and money managers generally benefit from higher interest rates.

Energy, materials, industrials, consumer discretionary, financials and information technology are traditionally considered cyclical sectors, as stocks in these sectors have tended to be highly correlated to economic cycles.

What stocks to buy against inflation? ›

The fate of the S&P 500 index — used by investors as a barometer for the health of corporate America, and cited by presidents as a measure of their handling of the economy — often comes down to just two companies: Apple and Microsoft. The companies that make up the S&P 500, sized by share of market value.

The best performing Sector in the last 10 years is Information Technology, that granded a +19.15% annualized return. The worst is Energy, with a +4.34% annualized return in the last 10 years. The main S&P 500 Sectors can be easily replicated by ETFs.

The S&P 500 is a great core holding, however, it lacks several dimensions of an optimally diversified portfolio i.e. the sector, geographic, currency and cap size. While 38% of S&P 500 earnings come from outside of the U.S., that is not the same as owning a portfolio that has 38% international stocks.

The SPDR S&P 500 ETF Trust (also known as SPY), which tracks the S&P 500 index, is a perfect example of a popular fund that allows for broad market exposure but offers limited diversification.

Do I need to diversify S&P 500 index fund? ›

Building a diversified portfolio

When building an investment portfolio from scratch, broad diversification should be the central goal. Instead of following the “only invest in the S&P 500” approach, diversify your portfolio across asset class, market, industry, market cap, and time.

That said, you shouldn't necessarily invest exclusively in the S&P 500. There are other indices, sectors, and groups of stocks you can invest in through mutual funds and ETFs, and there are some excellent individual stocks you can invest in.

No single asset can represent more than 10% of the fund's assets; holdings of more than 5% cannot in aggregate exceed 40% of the fund's assets. This is known as the "5/10/40" rule.

The average diversified portfolio contains between 20 and 30 stocks. While there is no one-size-fits-all answer to this question, it is influenced by a variety of factors, including your investment horizon, risk tolerance, and current portfolio diversification.

Key Points. With enough time and sufficient money invested, becoming a millionaire is very achievable. The S&P 500 has averaged annual growth of close to 10% over long periods. That kind of return is good enough to build solid wealth.

Warren Buffett is a firm believer in index funds. In fact, in his 2013 letter to Berkshire Hathaway (NYSE: BRK. A) (NYSE: BRK.B) shareholders, he wrote that his will recommends that most of the cash that goes to his family be put in a low-cost S&P 500 index fund.

You only need one S&P 500 ETF

You could be tempted to buy all three ETFs, but just one will do the trick. You won't get any additional diversification benefits (meaning the mix of various assets) because all three funds track the same 500 companies.

If you are purchasing an S&P 500 index fund:

If your index fund has no minimum (more common), then you can usually purchase in any dollar amount. If your index fund has a minimum (less common), then you have to purchase at least the minimum amount.

Regardless of where you invest, it's wise to keep a long-term outlook. The market could be shaky over the coming months or even years. But if you invest in an S&P 500 ETF and hold that investment for at least a couple of decades, you're almost guaranteed to make money.