The most stable sectors in the stock market
There are no permanently stable or unstable sectors in the stock market. Each sector has its good time, medium time and the competitive times. When new products of technological innovation are introduced in the market and if they catch the imagination of the consumers, companies in that sector are likely to progress fast. This happened with the IT and the Communications sectors in the last two decades. Nothing about the market can be predicted on a permanent basis. Issues go on changing, the priority changes, and they have direct bearing on the prices of shares.
As present indications go, some of the sectors that can be considered stable are as follows:
- Utility stocks: Renewable energy solutions. With the dwindling of the resources of energy currently in use like oil, fossils etc, the renewable energy option has to take over. The stocks of the companies that produce nature-friendly ways of producing renewable energy will definitely dominate the market. At present this is a proposition for patient investors, with a long-term perspective.
- Agricultural products: Articles of foods are used for universal consumption and command demand in the local and international markets. Since the production of such products is an ongoing process, the companies are able to design expansion plans. Fruits, vegetables and dairy products are in universal demand.
- Manufacturing sector: Normally, once their brands become popular, companies in this sector, thrive. Mining, electronics and petroleum products have universal demand.
- Banking sector: This sector faced some problems during the current recession, but that was applicable to some of the badly managed financial institutions. Otherwise, this sector is safe and good for investment.
- Stock markets, with internet dominating the scene, “the world is one family now” for investments also. Emerging markets and developing economies are constantly being watched by the investors. Many international stocks have scored over the traditional and domestic markets. Study the economy of the country like China. The uptrend may be applicable to one or all sectors.
- Study the region (international) and have a look as to what is happening there. Compare the domestic sectors with the same types of industries. When comparative advantages are seen, an investor needs to reach out to those sectors. For example, investing in steel companies in India, may be lesser profitable as compared to similar industries in USA or Germany.
- Study the historical and political perspectives well. Economics and politics are closely linked and the policies of the government have bearing on the stagnation or development of the industries. Asian markets improved a lot after World War II. Eastern European markets got a fillip after the disintegration of the Soviet Union. In the 1960s and 1970s, South Korea, Taiwan, Hong Kong and Singapore dominated the world scene in many sectors. Those occasions were the opportunities for the prudent investors.
- The current investment trend has shifted to the Indian and China markets. Every sector has good companies in these countries.
Study, research and invest. Your decisions need to be bold and imaginative. There are no historical examples for investment in China, for it has veered round to free trade for the past 2-3 decades only. You are taking the original decisions that have no precedents to bank upon. So, take care.