Sector Investment Strategies

Whether you're looking to gain a performance edge, or simply want to diversify your portfolio, these sector-based strategies can help you find your next investing opportunity.

Invest using the business cycle

The business cycle has four phases that reflect fluctuations in the U.S. economy, and each phase may have an effect on sector performance. Historically, some sectors tend to perform better or worse than others in certain phases. Monitoring the business cycle may help you determine which sectors you should focus your investing on during each phase.

Invest in a theme

Investing in a particular sector or industry may help you get exposure to particular companies, industries, or trends that may be poised for long-term growth. Themes may include the rise of cloud computing in the Information Technology sector, or innovations in drilling technology associated with the Energy sector.

  • Learn more about our thematic offering for exposure to megatrends or disruptive strategies.
  • Browse the Research Spotlights for each sector in Fidelity Viewpoints®.

Tilt your portfolio

If you feel that a particular sector suits your investing goals, based on economic, fundamental, or technical research that you've conducted, you can choose to "tilt" your portfolio (that is, overweight that sector in your portfolio relative to the sector's weighting in the broader market). You can also do this in the other direction, tilting away from a particular sector you feel could be a drag on your portfolio, by underweighting it.

Gain income from dividends

Some sectors offer the potential for dividend income, and may be a good way to bring more income into your portfolio. Companies in the Utilities sector, the Consumer Staples sector, and the Real Estate sector offer some of the best opportunities for dividend income.

Invest defensively in low volatility sectors

Some sectors have historically been sensitive to changes in the economy than others, and can be resistant to economic downturns. Sectors that consist of companies who offer essential goods or services, like the Consumer Staples sector, the Health Care sector, and the Utilities sector, may provide a good defense against market volatility.

Manage your single-stock risk

Fidelity believes that having more than 5% of your portfolio in a single stock is a "concentrated position," which may increase your overall investment risk. Though they have different characteristics, both sector mutual funds and sector exchange-traded funds (ETFs) may help reduce that risk, by offering more diversified exposure to a sector (and potentially to the same company) with less exposure to the volatility associated with owning a single stock.

Diversify with inflation-fighting sectors

When prices are rising, you may be able to help protect your purchasing power by investing in funds that have inflation-fighting potential. Historically, Materials, Energy, and the Real Estate have performed better than other sectors when it comes to combating the negative effects of inflation.