The overall market is broken up into groups of stocks. Any group of stocks that does roughly the same thing is called a sector. A sector is composed of a group of stocks that are in the same industry, or have roughly the same function.
For example if there is the metals sector of the stock market. The metals sector is composed of any company that has to do with buying or selling metals, mining metallic , or processing and refining metals.
So the metals sector of the stock market would be composed of steel producers, steel mills, gold Miners, platinum , copper and so on.
Sectors within can be further broken down into smaller more specialized groups, for example in the metals sector, there are industrial metals and precious metals. Precious metals would be stocks that have anything to do with gold, silver and platinum. Industrial metals are stocks that have to do with copper, steel, iron, aluminum and so forth.
The same thing is true of all stock market sectors. Let us use another example that everyone can understand. The original sector is a very large group of stocks that have a vaguely similar functions. Like the transportation sector or the health care,or energy, or drilling or even pharmaceuticals . Then that large sector can be broken down into the smaller more specialized sectors. The transportation stock sector can be broken down into airlines , railroads, trucking stocks and even shipping .
These smaller stocks can then be further broken down into some highly specialized stock market sectors, such as domestic or overseas, or by seasonality aspects however most people generally focus on the large sectors of the market, and then their individual niches. Beginners often use sectors to make money in the stock market; we will discuss this in another article.