As we covered in our page on Portfolios & Diversification, the overall objective of building a healthy portfolio is to
get rich minimise risk and maximise returns.
A good place to start idendifying risk is to look at stock market cliques, aka Market Sectors.
The Lunch Table
In every school there are cliques. Close knit groups of people that generally sit together during lunch. These grouped are based on common attributes & interests - athletes, tech nerds, musicians, popular girls, and so on so forth. A Market Sector is basically a clique of companies.
A company's market sector will tell you generally what kind of company it is, the service that it provides, and most importantly insight into what may or may not impact that business's success.
CIMB (1023) is a Corporate Bank and is naturally placed in the “Finance” Market Sector, meaning that they will sit with other similar companies such as MayBank (1155) or Public Bank (1295). On the other hand, InNature (5295), a retailer specializing in Personal Care Beauty Products sits in the “Consumer Products” market sector.
While each company has its own strengths and weaknesses, a market sector will exhibit its collective companies’ strengths and weaknesses.
The Perfect Friend Group
Spreading out your investments across multiple Market Sectors is an easy place to start decreasing your investment risk.
Like in life, diversity is the key to safe & stable growth. It’s best to have a portfolio of stocks from a mixture of cliques.
If your portfolio has a 50/50 split between Finance and Consumer Product stocks while your friend has only invested in Consumer Product stocks, your portfolio is going to experience less of a hit if there are economic / political issues and of course a global pandemic. Covid-19 negatively impacted companies in the Consumer Products market sector more than it did the Financial market sector.
By diversifying your investment, you are protecting your portfolio from drastic hits and increasing your chances of positive continued growth. Of course, there are still events that may impact multiple Market Sectors equally, so it is important to remain up to date on the latest opportunities and threats to your portfolio.
Top Market Sectors In 2020
Whet your appetite for trading by looking at Rakuten Trade’s top traded Market Sectors and stocks of 2020!
|Rank||Market Sector||Sector Attributes||Top 3 Traded Stocks|
|1||INDUSTRIAL PRODUCTS||Generally, consist of manufacturing and supply chaing companies.|
Variety of sub-industries such as plastics. petrochemical, and automotive parts.
Sensitive to raw material supply/price.
Machinery intensive and productivity driven.
|COMFORT GLOVES (2127)|
|HLT GLOBAL BHD (0188)|
|RUBBEREX CORP (7803)|
|2||TECHNOLOGY||Companies that are involved in the research and development of technology-based goods and services.|
Sub-sectors include semiconductors, software, hardware, and equipment.
Requires continuous intensive investment in innovation through research and development activities.
Driven by breakthroughs in technology.
|MY E.G. SERVICES (0138)|
|K-ONE TECHNOLOGY (0111)|
|DATASONIC GRP (5216)|
|3||CONSUMER PRODUCTS||Consist of companies involved in final goods or services that are consumed by individual or household customers.|
Widely related to our daily lives such as clothing, food, and beverages.
Performance depends highly on consumer behaviour.
Heavily reliant on brand differentiation, marketing, and advertising to succeed.
|AIRASIA GROUP (5099)|
|GENTING MYS BHD (4715)|
|GENTING BHD (3182)|
|4||ENERGY||Comprises of compnies involved in the production and sale of energy.|
Sub-industries include Oil & Gas, Renewable Energy, Nuclear Power, and Electrical Power.
Mostly large corporations with complex production streams.
Capital expenditure intensive and an important driver for industrial growth.
|HIBISCUS PETRO (5199)|
|SERBA DINAMIK (5279)|
|VELESTO ENERGY (5243)|
|5||HEALTH CARE||Generally, consists of companies involved in the provision of menical services, pharmaceuticals, and medical equipment.|
High barriers to entry due to stringent industry regulations.
Depends on government healthcare expenditure and household income.
Enormous part of a nation's economic development.
|CAREPLUS GROUP (0163)|
|SUPERMAX CORP (7106)|
|TOP GLOVE CORP (7113)|
|6||CONSTRUCTION||Consist of three main areas: Buildings, Infrastructure, and Industrial.|
Buildings - Residential and non-residential.
Infrastructure - Large public works such as railways and highways.
Industrial - Large industrial buildings.
Machinery intensive and labour dependent.
|EKOVEST BHD (8877)|
|JAKS RESOURCES (4723)|
|GADANG HLDGS BHD (9261)|
|7||FINANCE||Comprises of instiutions that provide financial services to commercial and retail customers.|
Encompasses a broad range of business including banks, insurance companies, and investment firms.
Crucial element of economic financial stability.
Largest index constituent on the stock exchange.
|MAYBANK BHD (1155)|
|CIMB GRP BHD (1023)|
|PUBLIC BANK BHD (1295)|
|8||PROPERTIES||Main major segments are residential, commercial, and industrial real-estate.|
Performance depends on the overall economic environment (high employment rate, rising household income, etc).
Demand is generally affected by interest rate movements, economic growth, and government policy.
|MAH SING GROUP (8583)|
|ECO WORLD DEV (8206)|
|NAIM HLDGS BHD (5073)|
|9||TELECOMMUNICATIONS & MEDIA||Consist of companies that provide telecommunication and media related services and equipment.|
Networking infrastructure and connectivity is crucial.
Good example of an oligopoly market in which is dominated by a few large industry players.
|GREEN PACKET BHD (0082)|
|BINASAT COMMUNIC (0195)|
|ASTRO MALAYSIA (6399)|
|10||TRANSPORTATION & LOGISTICS||Transportation companies provide services in the shipment of goods or transportation infrastructure.|
Logistics companies focus on goods storage, warehousing, and inventory management.
Relies on crude oil supply, hence companies in this sector are sensitive to crude oil price changes.
High investment spending due to the need for expansive vehical fleets (tricks, ships, planes)
|GD EXPRESS CARRI (0078)|
|POS MALAYSIA (4634)|
|MMC CORPORATION (2194)|
|11||PLANTATION||In Malaysia, this sector generally consists of players in palm oil production and palm oil related services and products.|
Other plantation crops include cocoa, sugarcane, and cotton for example.
Labour intensive, capital intensive, and weather dependent.
|RIMBUNAN SAWIT (5113)|
|BOUSTEAD PLN-ORD (5254)|
|FGV HOLDING (5222)|
|12||UTILITIES||Companies that provide basic amenities such as electricity and water.|
Comprises of large coporations, usually a safer investment option during economic downturns.
Stable flows of income as they serve as a valuable public service.
|TENAGA NASIONAL (5347)|
|EDEN INC. BHD (7471)|
|YTL CORPORATION (4677)|