How to read the financial pages

1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20   

13. Sectors

Every company quoted on the London Stock Exchange is pigeonholed into one of 45 or so industry sectors. Click here for the categories used by the Financial Times.

Some sectors like Banks are natural groupings of companies in similar industries. Others are artificial groupings of companies that don't easily fit anywhere else - Support Services for instance.

Sector classifications are useful for many reasons:

1. They make it easy for you to see which quoted companies are operating in each industry.
2. They enable you to see the profile of a whole industry. If you follow the share price movements of all the companies in a sector, you will get a feel for the winners and the losers, and also for how the sector is performing as a whole compared to other sectors.
3. They enable you to balance your portfolio by diversifying across sectors.

This last point is important. A key plank of portfolio diversification is to spread your money between at least three different sectors. Ideally they should be sectors with different kinds of characteristics:

• Some sectors are 'defensive' in the sense that they are resilient when the economy is doing badly.
• Other sectors perform strongly when consumer confidence is high and High Street spending is buoyant.
• Some sectors are inherently cyclical (e.g. construction)

You can get information on sector performance in a variety of ways. Some newspapers, including the Daily Telegraph, print the % movement of each sector in the daily share price listings. The FT on Saturday also summarises sector movements on the week.

For longer term information on sectors, it is best to consult the statistics tables in the back of the weekly and monthly magazines. Investors Chronicle provides tables of the best and worst performing sectors month by month.

Click here for the performance of the healthcare sector over the period of a year and Click here for the performance of the general retailers sector.

Shares magazine has a useful section describing significant developments in each sector during the previous week. Often the developments will relate to a particular company within a sector - but the developments may have an impact on other companies in it.

1. What are the financial pages? 2. What to look for 3. Business news 4. Share prices in newspapers 5. Investment trust prices 6. Share prices on the internet and television 7. Commentary on share price movements 8. Anticipating company results 9. Finding company results 10. Interpreting company results 11. Takeovers and mergers 12. Indices 13. Sectors 14. Directors dealings 15. Unit trust information 16. Government bonds 17. Corporate bonds 18. Economic data - who needs it? 19. Key economic indicators 20. Conclusion

• How to Read the Financial Pages
• Eat The Rich