Sector.

In plain English

A sector is a category that sorts companies by the type of business they run. Common sectors include technology, healthcare, energy, financials, and consumer goods. Grouping companies this way lets you see how a whole part of the economy is doing rather than just one stock. Sectors often move together because the same forces (interest rates, oil prices, new regulations) hit similar companies at once. If most of your money sits in a single sector, you are exposed to whatever hits that one slice.

01Why it matters

If you accidentally pile most of your money into one sector, a single industry downturn can take down your whole portfolio at once, which is the opposite of spreading out your risk.

02The math, step by step

Say you own five tech stocks and nothing else. They all sit in the technology sector. When new rules or a slump hit tech, all five can fall together in the same week. Someone who instead held tech, healthcare, and energy would feel a smaller dip, because those sectors do not always move in the same direction.

03What this is NOT

04Receipts

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