Best Sectors to Invest in Right Now

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Contributor, Benzinga
March 24, 2021

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The market has different sectors that offer investment vehicles for investors. And the best sectors to invest in changes as the economy and stock market evolve.

Stay on top of the market and invest in thriving companies. Get start in our guide to the best sectors to invest in right now.

What is a Stock Market Index?

A stock market index represents the performance of the stock market. The index reports the returns and risks of the biggest companies in the economy and is measured by a floating adjusted market cap.

The S&P 500, for example, is a U.S. stock market index and tracks the stocks of 500 large-cap companies. The stock market index tracks even the performance of penny stocks. w

What is an Investment Portfolio?

Every investor needs to have a good investment portfolio. A good investment portfolio will have diversified holdings from different sectors. This protects you from making big losses should the sector you invest in collapse.

You can have different stocks in your portfolio including stocks under $10, which are doing well according to the market index. To diversify, seek short-term and long-term investment options. If you want to get focused exposure on the most profitable sectors of the economy, observe sector funds.

Short-term and long-term investment options use the same index to determine reliability but vary when they offer returns. Short-term options are expected to yield returns in less than a few months or years.

They are highly liquid, so you can get your money back when you want it. These options also come with lesser risk compared to long-term investment options. Long-term options offer yield returns after more than 5 years.  

No one can comfortably predict which sectors will be able to beat the index. However, by looking at the trends and historical information of every sector, you can make an informed decision. 

Some top-performing sectors have survived the pandemic effect, including several companies with stocks under $5. Learn about some top-performing sectors and how you can invest in them.

Best Sectors for Long-Term Investments

When picking the best sectors for your long-term investment, the historical performance of the sector is very important. Here are the top sectors that offer favorable, long-term investment options. 

Art

Do you have $1,000 to $10,000 you’d like to invest? Why not invest with Masterworks? You can own shares of famous works of art — a great choice if you’re an art connoisseur.

You’ll get to choose famous works of art to invest in. While you’ll pay a management fee, your load is lighter than if you owned it yourself. 

Why? Because Masterworks takes care of art insurance, storage and transportation. 

You only pay a 1.5% annual management fee, and when Masterworks sells your art, it takes a flat 20% commission if its value has increased. 

If 7 years pass and Masterworks hasn’t found an opportunity to sell at a higher price, Masterworks may consider sending your painting to auction. It’s a great alternative investment option beyond the usual stocks and bonds and other “regular” investments.

Health Care

Health care can be described as the defensive sector. It has managed to survive numerous economic crises and still make profits. The health care and biotechnology industries have seen an impressive rise in technological advancements recently. 

Developments in the health care sector continue to grow each day. According to a report released by BlueWeave Consulting, global AI in the healthcare industry has a compound annual growth rate (CAGR) of 52.3%. By 2026, global AI will be at $37.9 billion in the next 5 years.  

The healthcare sector covers several other branches:

  • Hospital conglomerates
  • Insurance companies
  • Institutional services
  • Drug manufacturers
  • Medical instrument makers
  • Biomedical companies

In 2021, the healthcare sector will experience rising earnings.

However, the demand for healthcare services is constant regardless of the economic situation of a country or the world. Health care has been the top investment sector for the past decade.

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Computer and Technology

For the past 100 years, advancements in technology have transformed the face of the world. The sector is also known as information technology. The sector plays a vital role in the development and innovation of the Information Age.  Technology has changed the world into a small global village in the past 20 years. 

The sector contains 2 main stock categories:

  • Technological product manufacturers
  • Technological service industry companies

Each year innovations and inventions are created in the technology sector. A report released in February 2020 by Meticulous Research shows that the digital transformation market has a CAGR of 22.7%.

It has the potential of reaching $3,294 billion by 2025. These new products are meant to improve service delivery and human interaction. 

As of April 2020, 59% of the global population are active internet users. China, India and the United States had the highest populations. The internet connects more than 4.7 billion people globally. 

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Business Services

As more businesses come up in the world, so does the demand for business services increase. Financial services are one of the main business service segments that has steadily grown.

The segment is also referred to as digital commerce and includes online merchants, traders, payment solutions and international and local delivery companies. Meticulous Research reported that digital commerce will be worth $24.3 trillion by 2025. Digital commerce has a CAGR of 11.2%. 

More people use mobile phones to facilitate mobile payments in developed countries. The global payment industry has contributed significantly to the global e-commerce segment.

According to Statista, the digital payment segment of business services has a total transactional value of $4,406,431 million in 2020. This figure is expected to grow to $8,266,917 million by 2024.

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Best Sectors for Short-Term Investments

If you’re looking for a short-term investment option, these sectors offer the best choices to consider for your investment today.

Fast-Moving Consumer Goods (FMCG)

This sector is 1 of the most active sectors in the world. FMCG deals in the production of daily use products.

Everyday use products in the FMCG industry include detergents, batteries, cosmetics, soaps and toiletries. Since most consumers put little focus on these essential services, the FMCG sector offers a convenient investment option. 

The sector faces a lot of stiff competition, and the profit margins tend to be low. Consumer behavior is predictable and easily influenced.

The sector produces products in large quantities. This compensates for the low-profit margins.

There are several stocks under $20 companies that are successful in the FMCG industry. Most companies in this sector pay regular dividends to its shareholders, offering reliable income potential.

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Consumer Discretionary

Also known as cyclical consumer stocks, consumer discretionary mainly focuses on businesses that offer products and services considered to be more of a luxury and not a necessity.

The products and services are sensitive to economic cycles. The stocks of this sector are considered to be cyclical because they offer seasonal demand.

Examples of cyclical consumer stocks are Apple (AAPL), Starbucks (SBUX) and Disney (DIS). The demand for products and services in the cyclical consumer stocks increases when the economy is growing. Consumers have more purchasing power and are confident about their financial future. 

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U.S. Treasury Bonds

There are 3 types of Treasury bonds: T-Notes, T-Bills and T-Bonds. The Treasury bonds offer some of the best short-term, safe investment options.

Treasury bonds are backed by the U.S. federal government with an AAA credit rating. You can research the particular Treasury bonds that meet your investment needs. 

Although the FDIC doesn’t back individual bonds, these bonds are considered safe because of the assurance from the U.S. government. The government promises to pay the money in the future.

Government bonds are available on the exchanges. They are the most liquid bonds and can be exchanged on any day the market operates.

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Find our list of the best online brokers who can help you invest in any sector.

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Becoming More Risk-Conscious

Past performance of different sectors doesn’t guarantee future success. As an investor, you can choose to invest in sectors that have outperformed in the past. These sectors could continue to lead in the economy, but there is never 100% certainty. 

When buying any investment vehicle, you should avoid focusing on one sector only. When looking for short-term investment options, it’s essential to distribute your investments among different sectors.

Investing in specific businesses or companies is riskier because a company can fail. Instead, add to your investment some industry-specific index funds, ETFs and mutual funds — making your portfolio safer and more well-rounded.

Frequently Asked Questions

Can I buy stocks without a broker?

Yes. There are numerous options if you want to buy stocks without a broker. Companies offer stock-purchasing plans that vary depending on if you are an employee of the company.

If you are an employee, you can purchase company stock directly through a variety of options such as a direct purchase plan (DPP), a company stock purchase plan (SPP) or a company stock option purchase plan (SOPP).

If you are not an employee, you can buy stock from a company directly through either a Direct Stock Purchasing Program (DSPP) or a Dividend Reinvestment Plan (DRIP). By purchasing stock through a DSPP or DRIP, you can bypass brokers and brokerage fees to buy stock directly from your company of choice. 

Is it worth investing in penny stocks?

Penny stocks (also called micro-cap stocks) describe shares of a company that trade for low amounts. The greatest gains in penny stocks grow over years, so the worth comes after your wait. Learn more in our guide to how to invest in penny stocks.