Sectors are simply categories of stocks that share similar characteristics and drivers. Understanding these sectors and their role in a portfolio is essential for investors aiming to build well-balanced portfolios and make informed investment decisions. 

In this article, we’ll cover: 

• What stock market sectors are
• The importance of sector classification
• The 11 different stock market sectors
• The four main categories of stocks
• Analyzing sector performance

What are stock market sectors?

A stock market sector is a grouping of companies that exhibit similarities in their business activities, products, and services. These companies operate within the same industry or related business domains. Think of it like how sports teams are divided into leagues, and within each league is a division with groups of teams. 

The sectors in the stock market can be further broken down into industries and sub-industries. The concept of stock market sectors stems from the recognition that companies operating in similar fields tend to be influenced by similar economic conditions, regulations, and market dynamics. 

By grouping companies with shared characteristics, investors can gain valuable insights into how different sectors respond to various market forces.

Characteristics of stock market sectors

Stocks within the same sector often exhibit similar attributes, which can include:

• Industry trends: Companies within a sector tend to be influenced by overarching industry trends and technological advancements. For instance, the technology sector experiences rapid innovation and disruptive changes, impacting all technology-related companies within the sector.
• Risk profiles: Sectors can have different risk profiles based on factors like market volatility, regulatory changes, and competitive pressures. For example, the healthcare sector might be affected by clinical trial outcomes and regulatory approvals.
• Market capitalization: Sectors can contain companies of varying sizes, from large, established corporations to smaller, more agile enterprises.
• Business cycles: Economic cycles can impact sectors differently. For instance, consumer discretionary stocks perform well during economic upswings as consumers increase spending, while utilities are considered defensive stocks that are more stable during economic downturns.

Sector classification and categorization

The process of sector classification involves categorizing companies based on their primary lines of business. These classifications provide a structured approach to examining the market, as they group companies with similar operational characteristics and market dynamics together. For instance, technology companies are classified within the technology sector, encompassing hardware, software, and IT services providers.

By further organizing sectors into categories, such as basic materials, industrials, consumer goods, healthcare, financials, technology, and utilities, investors gain a simplified yet insightful overview of the economy’s key sectors. This streamlined perspective helps investors identify trends, anticipate shifts, and allocate resources more effectively.

The importance of sector classification

Sector classification serves as an indispensable tool for investors. Its significance lies in its capacity to facilitate the identification of trends, opportunities, and potential risks within specific segments of the economy. 

This, in turn, empowers investors to optimize their portfolios by diversifying across various sectors, managing risk exposure, and strategically distributing their assets. 

Key advantages of sector classification

The benefits of sector classification extend beyond portfolio optimization. For instance, understanding the performance of different sectors can also provide a glimpse into broader economic trends and potential indicators of future success or failure. 

As an example, investors may observe that the technology sector is performing well relative to other sectors in the economy – providing key insights into consumer sentiment and its possible implications for investment decisions. Some of the most significant advantages offered to investors include:

Risk Management 

Diversifying investments across various sectors not only reduces reliance on the performance of a single sector but also allows investors to incorporate defensive stocks. Defensive stocks, often found in sectors like utilities and consumer staples, tend to remain more stable during market downturns. This strategic allocation helps mitigate the impact of poor sector performance on the overall portfolio while safeguarding against market volatility.

Opportunity identification

Sector classification allows investors to pinpoint areas of growth and innovation. For example, as renewable energy gains traction, investors can identify opportunities within the energy sector by focusing on companies involved in sustainable practices.

Market Insights

Monitoring sector performance offers a window into broader economic trends. For example, robust performance in the consumer discretionary sector could signal heightened consumer spending and a boost in economic confidence. Similarly, tracking cyclical stocks, which often reside in sectors like technology, consumer discretionary, and industrials, can provide indications of the current phase of the economic cycle. When cyclical stocks perform well, it can imply economic expansion, while their decline might suggest an impending economic downturn. 

Tailored portfolio construction

Understanding sector nuances enables investors to align their portfolios with their risk tolerance, investment goals, and market outlook. Conservative investors might allocate more to stable sectors, while growth-oriented investors might favor sectors with higher potential returns.

The 11 different stock market sectors

The Global Industry Classification Standard (GICS) stands as a foundational framework that categorizes companies into 11 distinct stock market sectors. This systematic classification offers investors a comprehensive lens through which to view the economy. 

These sectors encompass a diverse array of industries, collectively providing a holistic snapshot of the business landscape. The 11 GICS sectors, each representing a unique facet of the economy, are as follows:

1. Energy: This sector encompasses companies involved in the exploration, production, refining, and distribution of energy resources like oil, gas, and renewable energy sources.
2. Materials: Companies within the materials sector engage in extracting, processing, and distributing raw materials, including metals, minerals, and chemicals.
3. Industrials: This sector includes companies that manufacture and distribute industrial products, machinery, equipment, and services essential for various sectors of the economy.
4. Consumer discretionary: Encompassing industries like retail, leisure, and entertainment, the consumer discretionary sector focuses on products and services consumers choose to spend their discretionary income on.
5. Consumer staples: Companies in this sector produce and distribute essential everyday products like food, beverages, personal care items, and household goods.
6. Health care: Engaged in providing medical services, pharmaceuticals, biotechnology, and medical equipment, this sector is critical for addressing healthcare needs.
7. Financials: Encompassing banks, insurance companies, investment firms, and real estate businesses, the financials, or financial services sector, is essential for managing capital and providing financial services.
8. Information technology: This dynamic sector revolves around technology companies involved in software development, manufacturing, and IT services.
9. Communication services: Companies within this sector focus on communication and content delivery, including telecom services, media, and entertainment platforms.
10. Utilities: Engaged in providing essential services like electricity, water, and natural gas, this sector is known for its stable income generation.
11. Real estate: This sector involves companies in real estate development, management, and investment, encompassing residential, commercial, and industrial properties. REITs are the primary investment opportunities in this sector.

The four main categories of stocks

Beyond sector classification, stocks are further categorized based on their market capitalization, growth potential, and ownership rights. This categorization provides investors with valuable insights into the risk and potential returns associated with different types of stocks, including:

Large-cap stocks

These are companies characterized by substantial market capitalizations, typically exceeding $10 billion. Renowned for their stability and established market presence, large-cap stocks are frequently considered safe investments. They are often favored by conservative investors seeking steady returns.

Mid-cap stocks

Falling within the market capitalization range of $2 billion to $10 billion, mid-cap stocks strike a balance between growth potential and stability. These companies are often viewed as having room for expansion while maintaining a degree of market maturity. Investors seeking opportunities for both growth and stability may find mid-cap stocks appealing.

Common stock

This type of stock represents ownership in a company and often includes voting rights in corporate decisions. Common stockholders bear the potential for higher returns as the company grows, but they also face greater risk due to their position at the end of the line during bankruptcy proceedings.

Preferred stock

Preferred stockholders, while generally foregoing voting rights, enjoy priority in receiving dividends and assets in case of bankruptcy. Preferred stock offers a more predictable income stream and is considered less risky than common stock.

Analyzing sector performance in the stock market

The stock market is a dynamic ecosystem where the performance of sectors can vary widely over time. Economic shifts, changing consumer preferences, technological advancements like AI or artificial intelligence, and geopolitical developments all contribute to sector performance fluctuations. 

During economic expansions, sectors like consumer discretionary and technology may thrive as consumer spending increases and innovation accelerates. Conversely, during economic downturns, sectors like utilities and consumer staples, known for stability, may outperform.

Investors must remain vigilant and regularly monitor sector performance to adjust their portfolios in response to changing market conditions. Adapting allocation based on sector performance can help optimize returns and manage risk effectively.

Building a diversified portfolio across sectors

Diversification serves as a cornerstone of successful investing, and sector diversification is a vital component of this strategy. By spreading investments across various sectors, investors can mitigate the risk associated with any single sector’s underperformance. A well-diversified portfolio ensures that poor performance in one sector is balanced by potential gains in another, thereby maintaining stability and potentially enhancing long-term returns.

Creating a diversified portfolio involves a thoughtful allocation to sectors that align with an investor’s financial goals and risk tolerance. For instance, a risk-averse investor might allocate more to stable sectors like utilities and consumer staples, while an investor seeking growth opportunities might focus on technology and consumer discretionary.

Understanding stock market sectors is a cornerstone of successful investing. These sectors provide a structured way to analyze the market, discover trends, and make more informed decisions. Whether an investor chooses to focus on the comprehensive 11 sectors or the condensed seven sectors, sector classification offers valuable insights for constructing a balanced and resilient investment portfolio. Remember that while sectors provide a useful framework, thorough research, and ongoing monitoring are key to making sound investment choices in an ever-evolving market.

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The post Exploring the 11 of Stock Market Sectors appeared first on Stash Learn.

In today’s world, it’s hard to imagine getting through the day without smartphones, computers, and even smartwatches or speakers that talk back to you. These products are all part of one of the most innovative sectors in the economy: Technology.

But the tech sector is much more than just a bunch of gadgets. It’s a vital part of the economy, employing more than 12 million people and producing almost $2 trillion worth of products, accounting for 10.5% of the U.S. GDP. Companies in this sector also produce parts such as semiconductors and microchips for new technologies, build electronic devices, develop software, and provide telecommunication and information technology (IT) services. Social media companies, which provide digital platforms for communication and commerce, are also a new and ever-evolving segment.

Many consider the tech sector to consist of two different sectors—information technology (IT) and communication services. The IT sector includes companies that provide networking infrastructure, make software, provide software services, produce hardware such as desktops and laptops, routers and other computer networking equipment. They also  manufacture semiconductors and semiconductor parts, not to mention security systems that keep networks safe. Media and entertainment businesses, as well as telecommunication operations, are part of the communication services sector. In this guide, we’ll explore IT and communication services as components of one sector: technology.

The tech sector continues to grow. In fact, as of 2020, there are 585,000 tech businesses in the U.S., up from 525,000 in 2018, according to the Computing Technology Information Association. And new and innovative products and services are expected from tech companies as consumers become increasingly dependent on technology.

About three-quarters  of Americans own either a desktop or laptop computer. Similarly, 85% of Americans own a smartphone, which was up from 35% in 2011, according to Pew Research Center. Meanwhile, 72% of Americans use some sort of social media outlet, compared to only 5% in 2005. 

Companies in the tech sector frequently respond to consumers’ expectations. Cisco makes new internet routers with faster service and better security to power home and business networks. Apple introduced an iPhone with a choice of two or three cameras. Instagram is toying with the idea of removing likes and has innovated with its new dark mode. And as semiconductors find their way into more products, processes, and services, companies like NXP and Toshiba search for faster and more resilient materials to make their products.

The tech sector also intersects with just about every other industry in the economy, including education, healthcare, utilities, manufacturing, and more.

Why invest in the tech sector?

Investors looking for innovation and growth may want to consider investing in the tech sector, which has a wide range of companies.

Companies in the tech sector vary in size and influence. You can invest in big technology companies such as Facebook (now known as Meta), Amazon, Apple, Netflix, and Google, known by the acronym FAANG. Other large companies involved more exclusively in the IT sector include Cisco, which manufactures routers, Hewlett-Packard, which makes laptops and cloud data centers , and IBM, primarily involved in the manufacture of software. Or if you’re interested in tech companies that are relatively new to the sector, you can invest in smaller start-ups that are working to disrupt their industries.

You can have your pick of companies that are building everything from computers, games, and websites, to networks, artificial intelligence, and apps that increasingly run the economy.

Volatility in the Tech Sector

The tech sector, with its constant innovation and evolution, is generally thought to be volatile, meaning there’s greater potential for risk, as stock prices can change frequently. 

One reason is that tech stocks have historically been cyclical, meaning they move up and down based on the economy and consumer demand. But that may be changing, as business models for tech companies change to include subscription models and services, according to experts. 

Companies in the tech sector may also face an overvaluation problem, or the possibility that their stocks trade far above their actual value. That can add to volatility, as the stocks may be likely to move up and down with greater speed.

U.S. tech companies are also facing more competition from countries such as China, South Korea, and Taiwan, among others. Competition can add to volatility. 

Regulations and the tech sector

FAANG stocks including Facebook, Amazon, and Google are dealing with increasing scrutiny from lawmakers in Washington over issues about consumer privacy, security, as well as fears that they may be monopolizing entire industries.

Conservative politicians have also accused tech companies such as Facebook and Google of having a liberal bias, which the companies themselves contest. Former President Trump also sued social media companies for banning him for his role in inciting the January 6, 2021 riot on the U.S. Capitol.

Technology is also becoming more politicized as concern grows over political advertising on social media. Mark Zuckerberg, Facebook’s founder and chief executive officer, has testified on more than one occasion before Congress about the information Facebook collects about its customers. For example, he testified in 2016 about Facebook allowing the data firm Cambridge Analytica to access and use information of 50 million Facebook users to advertise to them politically.  

Numerous politicians from both sides of the political spectrum as well as regulators, are grappling with the extent to which social media companies may be monopolies. Some have called for increased oversight, including breaking up some of the biggest tech companies such as Google, Amazon, and Facebook.

What companies can I invest in? 

In 2021, more than 130 technology companies had initial public offerings, or IPOs, raising approximately $60 billion by offering their stock to the public for the first time. These include food delivery app DoorDash, home-sharing  site Airbnb, intelligence software company Palantir, and more. 

Investors in the U.S. can buy shares of these companies and any other public company in the tech sector individually, or through funds—such as exchange-traded funds, or ETFs—that invest in baskets of those companies.

Investing in the tech industry: single technology stocks

A single stock is just that, a share of ownership of a company. For example, investors can purchase shares of stock in companies like Alphabet, Apple, IBM, Netflix, and Microsoft.ª

Investing in tech ETFs (exchange-traded funds)

Exchange-traded funds (ETFs) are a basket of investments bundled into a fund that’s traded on an exchange like the Nasdaq or NYSE.

When you invest in an ETF, you are effectively buying small fractions of the companies within that ETF. The fraction depends on the weights of stocks held in that fund. That fund owns the stocks within it and generally tracks an index–or group of investments that represent part of an industry or investment theme.

Tech ETFs vs tech stocks

ETFs have become popular in recent years as they give investors the opportunity to invest in the performance of a group of stocks without having to buy every single stock in the fund or handpicking single stocks.

Not only can this save time and research, ETFs can offer diversification, which many consider being an essential investing strategy.

Want to invest in the tech sector? You can check out the themed investments offered on Stash, as well as single technology stocks.

The post What’s the Tech Sector? appeared first on Stash Learn.

The economy couldn’t function without a solid banking system, but the financial services sector is much more than just banking. The sector also includes alternative lenders, credit card companies, financial service providers, and increasingly, fintech and cryptocurrency businesses, and more. 

However, banks are the backbone, holding and providing the money that consumers spend to keep businesses open. Banks also help people invest money, and potentially build wealth. Additionally, banks provide loans and financial services to businesses which can help them grow and stay in business. 

This sector, which employs over 8.5 million people in the U.S. as of September 2021, keeps money flowing between businesses and people. Financial services contribute about 8% to the gross domestic product of the U.S. And as of the second quarter of 2021, finance and insurance businesses accounted for almost $3.6 trillion of GDP.

As of 2020, there were 4,377 commercial banks insured by the Federal Deposit Insurance Corporation (FDIC) in the U.S., with almost 75,000 branches across the country. And total assets held by U.S. banks totaled almost $22.6 trillion. In 2020, the four biggest banks in the country—JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo—held a record $10 trillion in total assets. 

Source: Federal Reserve, June 2021

How do banks earn money?

Banks earn money in a variety of ways. You may not know it, but when banks take your money as a deposit, they also lend it out to others and make money from the interest they charge on the loan.

That interest can be for loans such as mortgages and credit cards. But banks can also charge fees on checking and savings accounts, such as overdraft or under limit charges.

Banks that issue credit cards also collect a portion of interchange, which is a fee charged to merchants for accepting cards for payment.

And many of the largest banks, known as Wall Street banks, have prominent investment divisions, which charge for stock and bond trading, as well as for their services involved in bringing companies public, through a process called an initial public offering (IPO).

A changing landscape for financial services

Since the financial sector is so essential to the economy, it tends to be heavily regulated, both at the state and federal level. Those regulations ensure that banks meet capital requirements that ensure they have enough cash on hand to meet their obligations to consumers and businesses. They also help to diminish some of the risk they might otherwise take in their investments. Yet other regulations also lay out principles that ensure they behave ethically toward consumers, for example by lending fairly.

The two main overseeing bodies for commercial banks are the Federal Deposit Insurance Corp.(FDIC), which insures consumer deposits, and the Office of the Comptroller of the Currency (OCC)which tests the solvency of banks.

Following the financial crisis of 2009, regulators put in place a new set of requirements called the Dodd-Frank Act that protect consumers from abusive lending practices, and that prevent banks from getting “too big to fail.”  In 2018, however, Congress voted to roll back some of the restrictions outlined in Dodd-Frank for banks with less than $250 billion in assets, easing their reporting requirements and capital restrictions. 

Role of the central bank

There’s another component to the financial sector in the U.S. that’s important to know about.

It’s called the Federal Reserve System.

The Federal Reserve, also known as the Fed, is the central bank of the U.S. It comprises 12 district banks located throughout the country, which together are responsible for the monetary policy of the U.S.

The Fed’s mission is to oversee the health of the nation’s financial system. It attempts to keep the economy strong and growing by enacting policies to maintain low inflation and healthy employment levels. It does this primarily by adjusting interest rates and lending money to the nation’s banks.

The Fed sets something called the overnight funds rate, which is also known as the federal funds rate. This rate dictates how much it costs for banks to lend their money to other banks, specifically the central bank. The Fed can manipulate the rate in certain ways, which can have effects throughout the economy.

For example, at the start of the pandemic, the Fed lowered the federal funds rate to almost zero percent to stimulate the economy with so-called cheap money in the form of low-interest loans.  The Fed has kept the rate there, and has been hesitant to increase it, since the economy is still recovering. But that influx of cash has push inflation up, and maybe keeping inflation higher than normal.

The future of banking 

While commercial banks and the Federal Reserve make up the traditional banking sector, new technology is shaking up the banking industry. And new financial services companies (such as Stash), known as FinTech companies, are disrupting the market.

Today, there are hundreds of such companies changing the way we bank, spend, lend money, accept payments, finance our businesses, apply for mortgages, and more.

Perhaps the oldest and best-known is Paypal, which in the early days of the Internet allowed people to pay for things online in a secure manner, using either a credit card or a bank account.

Paypal is a multibillion-dollar company. It’s also facing disruption by a host of startups including Stripe, Venmo, Dwolla, and Square.

In short, the financial services industry is moving beyond handing hand-written checks to your local bank teller. Banking is becoming global and mobile, giving more people the ability to access their money from wherever they are in the world.

Cryptocurrency and financial services

Cryptocurrency, a digital asset that doesn’t rely on physical currency, is also changing the financial services sector. Cryptocurrency uses something called blockchain, or distributed ledger, software. That means code produces an encrypted record of the value of each virtual coin and the transactions it’s involved in, distributing that record across numerous networks on the Internet. Distributed ledger is different from the way your bank keeps track of your dollars, in a centralized database that only it controls, cryptocurrency experts say. Since its introduction in 2009, more than 2,000 types of cryptocurrency have emerged, including Bitcoin, Ethereum, Stellar, and Binance Coin. 

Cryptocurrency has also opened the door for something called decentralized finance, or DeFi. DeFi is an economy that’s entirely online and based on cryptocurrency, typically Ethereum. Businesses in the DeFi industry, often called DeFi apps or dapps, operate by taking out the middleman: traditional banks. Rather than requiring the many steps banks use, DeFi uses the technology behind cryptocurrency to securely and automatically carry out financial transitions, such as loans, peer-to-peer transactions, and more.

It’s important to remember, however, that cryptocurrency isn’t recognized as an official currency, and it has a tendency to be highly volatile. So you should keep that in mind if you’re interested in cryptocurrency or participating in DeFi.  

Investing in financial services

Banks aren’t just places that hold and move your money. They’re businesses, and you can invest in them. You can invest in individual stocks of financial services. Stash also offers exchange-traded funds (ETFs) within this sector. 

If you do decide to invest in financial services, you should know that investments in this sector tend to be cyclical, meaning that they respond to changes in the economy. When the economy is doing well, financial services also tend to perform well, and vice versa. 

Following the Stash Way can help protect you from market volatility. You can follow the Stash Way by investing regularly in a diversified portfolio that includes stocks, bonds, and ETFs across a variety of sectors. 

The post What the Financial Services Sector is All About appeared first on Stash Learn.

The energy sector makes it possible for you to drive your car, turn on your air conditioner, and so much more.

This sector includes companies that generate power, from sources as varied as petroleum, natural gas, coal, renewable fuels, and electricity from wind, solar, hydropower, geothermal, and nuclear power. Providing power to factories, businesses, cars, trucks, planes, trains, homes, and more, the energy sector is critical to the functioning of every sector of the economy. 

The companies in this industry, which have a combined market value of approximately $700 billion, harvest natural resources, through oil drilling, coal mining, wind farms and hydroelectric plants. They’re then responsible for turning natural resources into energy, which can be used by consumers and companies alike.

Some of the most profitable companies in the world—including Exxon, Chevron, China National Petroleum, Royal Dutch Shell, Saudi Aramco, and more—are part of the energy sector. Still, these companies are also linked to the worsening climate crisis. The burning of fossil fuels such as coal and oil has caused the earth’s temperature to increase over time, intensifying natural disasters like hurricanes and droughts. But as energy companies grapple with their role in the changing climate, the sector has become an area of innovation in renewable energy sources like wind, solar, and hydro power.

Know your Btus

When you think about energy, it’s helpful to know how it’s measured. Energy is commonly measured in something called British thermal units (Btu). (Another method is called the kilowatt-hour.) Energy is bought and sold according to these units. A Btu is the quantity of heat required to raise the temperature of one pound of liquid water by 1℉ at the temperature that water has its greatest density, according to the U.S. Energy Information Association. In 2020 alone, the U.S. consumed 92.94 quadrillion Btu of energy. The industrial sector, which is made up of agriculture, manufacturing, mining, and construction businesses uses the most energy, 33% of the total consumption. This sector is followed by transportation (26%), residential use (22%), and commercial use (18%). 

The most-consumed source of energy is petroleum, making up 32.23 quadrillion Btu. Petroleum is followed by natural gas (31.54 quadrillion Btu), renewables (11.59 quadrillion Btu), coal (9.18 quadrillion Btu), and nuclear (8.25 quadrillion Btu). 

In 2018, the U.S. spent $1.3 trillion on energy, in transportation, residential, commercial, and industrial uses. The energy sector reportedly contributes to 6.2% of the Gross Domestic Product (GDP) of the U.S. As of 2019, the energy sector employs 6.7 million people in the U.S, accounting for 4.6% of American employment. Employees in this sector work in electric power generation and fuel, transmission distribution and storage, energy efficiency, and motor vehicles. 

Here are some of the biggest companies in the U.S. energy sector, by energy source: 

Oil and natural gas companies, by market capitalization: 

• Exxon Mobil Corporation, based in Texas, has a market cap of $145.2 billion. 
• California-based Chevron Corporation has a market cap of $134.4 billion.
• ConocoPhillips, also based in Texas, has a market cap of $35.2 billion. 

Coal mining companies, by production: 

• Based in Missouri, Peabody Energy Corporation produces 138.7 million short tons per year.
• Also based in Missouri, Arch Coal Inc. mines 87.9 million short tons of coal annually.
• Navajo Nation, which is based in New Mexico, puts out 47.1 million short tons of coal each year.

Nuclear energy plants by output: 

• Palo Verde Generating Station in Arizona, which generates 3.93 Gigawatts of energy.
• Based in Alabama, the Browns Ferry Nuclear Plant puts out 3.4 Gigawatts of energy.
• Peach Bottom Atomic Power Station, based in Pennsylvania, generates 2.77 Gigawatts.

Renewable energy, by market cap: 

• NextEra Energy in Florida, with a market cap of $147.8 billion.
• Based in Arizona, First Solar has a market cap of $8.6 billion.
• Renewable Energy Group is based in Iowa, with a market cap of $2.9 billion.

The progression toward renewable energy

Climate change, or the warming of the planet over time because of greenhouse gas emissions from fossil fuels, has led to an increased emphasis on renewable energy. The summer of 2021 has seen record temperatures in the U.S., with places like the Pacific Northwest and the Southwest experiencing severe heat waves. Currently, the planet is on track to get hotter by 7℉ by 2100. The Paris Agreement, which is an international treaty made in 2015 between 196 parties, aims to limit global warming to less than 2℃ by 2050. 

2020 was the biggest year for renewable energy consumption to date, with renewable energy sources accounting for 12% of the energy consumption in the U.S., or 11.59 quadrillion BTU. From the late 19th century onward, the biggest sources of energy have been nonrenewable fossil fuels such as coal, natural gas, and petroleum. 

And until the 1990s, the most common sources of renewable energy were hydropower and wood. In recent years, the focus has shifted to other sources of energy such as biofuels, geothermal energy, solar energy, and wind energy. 

Investing in the energy sector

While the energy industry is changing, energy is always necessary to power industries, homes, and the economy. If you want to invest in the sector, you can do so with Stash by investing in shares or fractional shares of companies that produce and provide energy from nonrenewable sources such as oil and gas, or renewable sources like wind, water, and solar power.¹ 

Keep in mind that while energy is vital to the economy, the sector can also be volatile, depending on supply and demand of the commodities that power the sector, such as oil and gas. For example, when the Covid-19 pandemic reduced demand for oil and gas, the S&P 500’s Energy sector dropped 36.2% while the overall S&P 500, which fell about 7%. 

The best way to combat volatility in investing is by following the Stash Way®, which recommends investing small amounts of money regularly in a diversified portfolio. One way to diversify your portfolio is by investing across different sectors such as technology, materials, and utilities. Doing this can help balance your portfolio and protect you from taking on too much risk.

The post How the Energy Sector Powers Cars, Businesses, and Homes appeared first on Stash Learn.

The health care sector is critical to the health and well-being of the almost 330 million people who live in the U.S. And access to good medical care has contributed to the increase in the average American’s life expectancy over the last several decades. But this sector is also essential to the economy, employing millions of people and making up almost one-fifth of the total economic output of the U.S.

What is the health care sector?

In 2019, Americans spent a total of $3.8 trillion on health care, or $11,582 per person, an increase of 4.6% from the previous year. Health care spending accounts for 17.7% of the Gross Domestic Product (GDP) of the U.S. One of the biggest employers in the country, this sector employed 20.5 million people, culminating in a payroll of more than $1 trillion.

The health care sector in the U.S. includes many different industries and businesses that work together to provide medical care to people: 

• Companies that manufacture medical equipment— everything from scalpels to MRI machines—are part of this sector. The leading businesses in the medical equipment industry are Medtronic, with a revenue of $28.91 billion, Johnson & Johnson with $25.96 billion in revenue, and Abbott Laboratories with a revenue of $19.95 billion.
• The health care sector also includes pharmaceutical companies that make the prescription drugs needed to treat cancer, diabetes, depression, and more. Brand name pharmaceutical manufacturing is a $205 billion industry, led by AbbVie, Bristol-Myers Squibb, Johnson & Johnson, Merck & Co., Amgen, and Pfizer.
• There are hundreds of biotechnology companies in the U.S. that produce medicines, therapeutic treatments, and other medical products through the development of biological and chemical processes. Biotech firms are responsible for a great deal of the innovation in the health care industry, experimenting with new treatments for illnesses. Biotech companies such as Moderna, Novavax, and Gilead have been at the forefront of the development of vaccines and treatments against Covid-19. In the U.S., the biggest biotech companies by market capitalization are Moderna ($66 billion), Vertex Pharmaceuticals ($56.4 billion), and Regeneron Pharmaceuticals ($55 billion). 
• Health care facilities and professionals are critical to the health care sector. There are more than 6,000 hospitals throughout the U.S. and consumers spend more than $1.2 billion on those facilities annually. 

Regulation in the health care sector

Health insurers are also important to the health care sector in the U.S. The health insurance industry is a $1.1 trillion market, growing 5.1% on average per year between 2016 and 2021. Health insurance is intended to protect you from incurring massive, unplanned costs from your medical treatment. 

About half of Americans receive health care coverage from private insurers through their employer, according to a 2019 survey from Kaiser Family Foundation. (More than one-third self-purchase government insurance, and the remainder are uninsured. See graphic below.) The largest providers of medical insurance in the U.S. are UnitedHealth, Anthem, and Humana. For those people who don’t receive health care coverage through work, the 2010 Affordable Care Act was created to help make coverage more affordable and accessible.

*Source: Kaiser Family Foundation, 2019

Both state and federal agencies, including the Food and Drug Administration (FDA), the Centers for Disease Control and Prevention (CDC), the Department of Health and Human Services (HHS), and  the Centers for Medicare & Medicaid Services (CMS), regulate the industry to help maintain fair costs and good care for patients.

Since the late nineteenth century, there has been a push to create a public option for medical insurance subsidized by the federal government. Proponents of this movement support universal health care, which would aim to provide the same coverage to all Americans at the same cost. In recent years, politicians such as Senators Elizabeth Warren and Bernie Sanders have thrown their weight behind the movement for Medicare for All, which aims to expand the public option to include all Americans. Opponents of the movement have argued that Medicare for All could further complicate the health care system in the U.S., and prevent people from getting the care they are used to receiving.

Investing in the health care sector

You might decide to invest in the health care sector for a number of reasons. Health care is a necessity for everyone, and the demand for things like equipment and prescription drugs is consistent. Additionally, the health care sector is the second-largest one in the S&P 500.  Adding health care investments to your portfolio can help you diversify. 

Health care stocks tend to be defensive, meaning that they deliver consistent results regardless of how the economy is performing, since people always need health care. For example, as of April, 2020, the health care sector fell only 18% from February 19, 2020 as a result of the pandemic, while the rest of the S&P 500 dropped 27%. 

Still, all investing involves risk, and this sector is no exception. Because the health care industry is heavily regulated by the government, any changes to policy related to health care can affect the performance of those stocks.¹ Additionally, biotech stocks can be volatile, and therefore risky for investors. 

When investing, remember to follow the Stash Way® by investing small amounts of money regularly in a diversified portfolio. Diversifying your portfolio with investments across several different sectors can help protect you from taking on too much risk. With Stash, you can invest in single stocks of health care companies like Abbvie, UnitedHealth, Moderna, and more.² You can also invest in ETFs that include health care companies.

The post How the Health Care Sector Provides Essential Services, and Powers the Economy appeared first on Stash Learn.

Those purchases might include a new car or dishwasher, the latest pair of kicks from your favorite sneaker store, or maybe an exotic trip. These are non-essential goods, services, or experiences that you may buy, more because you want them than need them.

When you spend money on these things, you’re supporting something called the consumer discretionary sector of the economy.

What’s consumer discretionary spending all about?

Consumer discretionary spending, also called consumer cyclical spending, refers to spending on non-essential items, and it depends on economic cycles. When the economy is in good shape, more people are generally working, wages tend to rise, and more money flows through the economy. As a result, people tend to spend more on discretionary items.

In contrast, when times are tough and the economy slows or is contracting, people will reduce their spending on discretionary items, while they continue spending on the stuff they need, such as groceries, toilet paper, and toothpaste.

Consumer discretionary purchases are frequently for bigger-ticket items, such as motorboats, jewelry, home appliances or a hard-earned vacation. That’s one reason they’re thought of as discretionary—because they require more excess cash.

But just as often, they can be for retail purchases, such as movie tickets, hotel stays, or eating at restaurants, among other things.

Some examples of companies operating in the consumer discretionary sector include:

• Dunkin’ Brands, producer of donuts and coffee drinks.
• Ford and GM, the car manufacturers.
• Expedia, the online travel purveyor.
• MGM Resorts and Hilton, the destination resort and hotel chains.
• Home Depot, the home improvement retailer.

The consumer economy

Consumer spending is a driving force behind the economy, accounting for about 70% of all economic activity in the U.S. But there isn’t just one type of consumer spending.

In addition to the consumer discretionary sector, for example, there’s also the consumer staples sector, which produces products like toothpaste, baby diapers, and canned food that you may use every day or every week. Big companies such as Johnson & Johnson and Procter & Gamble dominate the industry producing consumer staples. Their stocks are often known as “defensive stocks,” because people purchase these products no matter the economic environment. Hence, these stocks can provide investors shelter when the economy encounters difficulties, such as a slowdown or a recession.

How consumer discretionary stocks can help diversify your portfolio

When you build your investment portfolio, it’s important to diversify. Diversification means that you’re not putting all your eggs in one basket, by investing only in stocks, or stocks in one sector, for example. Consumer discretionary stocks can help you diversify the stock portion of your portfolio.

The consumer discretionary sector accounts for about 13% of the total stock market value, roughly equivalent to the health care and financial sectors, according to reports.¹

When you’re thinking about your portfolio, however, it’s important to keep in mind that each person’s situation is different, and there is no one way to diversify your holdings. A proper diversification strategy should be tailored to your own situation.

Good to know: A recent change in the way companies are sorted into sectors has made the consumer discretionary sector a bit smaller, as names like streaming content provider Netflix and cable company Comcast have been routed into a new sector called communications.

Ready to build a diversified portfolio—which may include consumer discretionary stocks? You can get started on Stash.

The post All About Consumer Discretionary Stocks appeared first on Stash Learn.

iOS and Android, of course, are the world’s most widely-used smartphone operating systems—99.6% of all new smartphones run one of the two systems.

Apple’s iOS, which runs on iPhones, is the most popular in the U.S., with roughly 65% of Americans’ smartphones running some version of the system as of 2018, according to industry data. The remaining 35% run Android, which is a Google product, and is installed on roughly 85% of smartphones around the world.

And because Stash runs on both platforms, we can get an inside look at the differences between how iOS and Android users invest their money.

To conduct the analysis*, Stash’s data team looked at the percentage of users that hold certain investments on both iOS and Android, and compared the two to identify the investments (stocks and ETFs) with the greatest disparity.

Here’s what we found out:

Key takeaways from the Stash data team:

• iOS users tend to have higher incomes, and identify themselves as more experienced investors.
• iOS users’ portfolios tend to be more vested in the tech sector.
• Android users’ portfolios skew toward the food and beverage industries.
• Android users tend to prefer individual stocks over ETFs.

Here’s how things break down by investment choice:

Investments that skew toward Android users (compared to iOS users):

• Twitter (twice as likely to hold than iOS users)
• Monster (twice as likely)
• Hershey (70% more likely)
• Hewlett Packard
• YUM! Brands
• Activision Blizzard
• Mondelez
• Royal Caribbean Cruises
• Tractor Supply Co.
• Deere & Co. (John Deere)

Investments that skew toward iOS users (compared to Android users):

• Apple (Twice as likely to hold than Android users)
• Modern Meds (60% more likely)—an ETF that focuses on biotechnology and pharmaceuticals (XBI)
• Copy the Experts (41% more likely)—an ETF that focuses on the companies that top hedge funds are excited about (GURU)
• AT&T
• Colossal China—an ETF that focuses on China’s top companies (GXL)
• Starbucks
• Salesforce
• Aggressive Mix—an ETF that’s balanced specifically for investors with a moderate risk profile (AOR)
• Nike
• Facebook
• Destination Recreation—an ETF that focuses on entertainment and leisure (PEJ)
• Snap
• Target
• Social Media Mania—an ETF that focuses on social media companies (SOCL)

Gain more investing insight by subscribing to the Stash newsletter.

The post iOS Stashers vs. Android Stashers: Do They Invest Differently? appeared first on Stash Learn.

These items are known as consumer staples, because we buy them regularly, through good economic times and bad ones. Why? Because we need them.

In fact, consumer spending drives about 70% of all economic activity in the U.S. We spend up to a quarter of our income on consumer staples.

Here are some examples of top consumer staples companies, and the products you might be buying:

• Campbell Soup, which makes its iconic tomato soup and hundreds of other varieties of soup, also produces Pepperidge farm cookies, V8 vegetable juice, and Pacific Foods organic broths.
• Coca-Cola, which manufactures soft drinks including Coca-Cola, Fanta, Sprite, and Odwalla.
• Conagra produces Hunt’s ketchup, Hebrew National hotdogs, not to mention Redi-Whip and Peter Pan peanut butter.
• General Mills, producer of Cheerios, also makes Pillsbury products, Haagen-Dazs ice cream, not to mention Green Giant canned vegetables, and Nature Valley granola bars.
• Hershey Company, the maker of chocolate bars, also churns out Kisses, Kitkats, Fifth Avenue bars, and Twizzlers, among others.
• Kellogg’s gets your morning going with frosted flakes, Eggos, Rice Crispies, and Pop-tarts.
• Kimberly-Clark’s products include household items such as Kleenex, Huggies, Scott toilet paper and Kotex.
• Procter & Gamble, the maker of Pampers disposable diapers, Oral-B toothbrushes, and Tide laundry detergent.

Who makes consumer staples?

Big companies such as Johnson & Johnson and Procter & Gamble dominate the industry producing consumer staples, and their stocks are often known as defensive stocks because they can provide shelter when the economy encounters difficulties such as a slow down or a recession.

How can consumer staples help diversify your portfolio?

Consumer staples stocks have a reputation for independence from the usual ups and downs of the market. That’s because the companies that produce consumer staples rely on consumers’ everyday use of their products.

This dependability makes consumer staples different from items that people might buy when they have extra money lying around, such as new cars, clothing, and home appliances.

What’s the difference between buying toilet paper and a washing machine? Bigger purchases are said to be made with discretionary spending dollars, and they definitely depend on economic cycles—when times are good, people buy more of them, and fewer when the economy is not so good. We all need toilet paper, no matter how the economy is doing.

And investing in the consumer staples sector could potentially add a counterbalance to riskier growth stocks in your portfolio, as consumer staples may be less volatile than other assets.

When you’re thinking about your portfolio, however, it’s important to keep in mind that each person’s situation is different, and there is no one way to diversify your holdings. A proper diversification strategy should be tailored to your own situation.

Consumer staples and dividends

Many consumer staples companies also pay stock dividends, which is generally a sign of their stability and maturity as businesses. Dividends can also add to investors’ total returns over time. Examples of consumer staples companies have recently paid dividends include Hershey, Procter & Gamble, and Kimberly-Clark.

Consumer staples in 2018

Consumer staples haven’t had a great 2018. As a category, these stocks are down about 6.7% for the year, according to research.

Rising interest rates, the pressure to continually cut product prices, competition from e-commerce companies, and growing consumer preference for smaller independent brands have taken the wind out of the sails of the sector temporarily, according to some analyst research.

Nevertheless, during the late phases of strong economic cycles, such as the bull market we’ve been in for the last decade, consumer staples also tend to do better, according to analysts.

Consumer staples during the 2008 financial crisis

In fact, consumer staples were one of the best performing sectors during the financial crisis that began in 2008, dropping about half as much as the broader market. (During the Dotcom bust of the early 2000s, when the S&P 500 lost half its value, returns on consumer staple stocks actually increased 1.2%, according to reports.)

While consumer staples companies may grow more slowly than the high-flying companies in the technology industry or other red-hot sectors, they tend to grow dependably over time.  For example, in 2018, the sector is expected to notch earnings growth of approximately 11%, about half the rate of the broader S&P 500 index.

Meanwhile, consumer spending in the U.S. on staples is expected to grow by about $600 billion by 2020, according to investment research.

The post Consumer Staples: Find Out About Defensive Stocks appeared first on Stash Learn.

Every year, E3 provides a peek at the future of an explosive industry, and what the next chapters of its short but storied history hold in store.

E3 2018 biggest announcements

Gamers look forward to E3 because it’s typically when the major gaming studios and industry players show trailers or teasers for the newest games and hardware that are slated to be released over the coming year.

For example, at this year’s expo, we saw announcements for future installments to some of the biggest and most beloved gaming franchises:

• “Fallout 76” – War never changes, and the fight heads to the hills of West Virginia.
• “Gears of War 5” – We’ll see this “Gears” sequel, with a strategy and mobile game, too.
• “Halo Infinite” – Master Chief is set to return in what could alternately be called “Halo 6”.
• “Elder Scrolls VI” – We only got a peek at this coming sequel to “Skyrim”, and likely have a long time to wait before it’s actually released.
• “Super Smash Bros.” – Nintendo’s famous fighting game gets a new installment.
• “The Last of Us Part II” – The sequel to 2013’s award-winning breakout hit is slated to launch on the PlayStation 4 in December.

And there are many, many more.

Aside from established franchises, some developers use E3 has a chance to resurrect dead titles. Bethesda Games did just that at E3 2014 when it announced a new Doom game (released in 2016), and this year, we got word of its sequel: Doom Eternal.

In addition to all of that, we also got word that Microsoft is hard at work on the next iteration of the Xbox.

“The same team that delivered unprecedented performance with Xbox One X is deep into architecting the next Xbox consoles,” Phil Spencer, Executive President of Gaming at Microsoft said during the company’s press conference.

What does it mean for the gaming industry?

Gaming has already captivated billions around the world, with the industry already having worked its way into 66% of American households, and driving revenues expected to top $230 billion in the next five years, according to industry data.

With new titles and entries for some best-selling series like “Halo”, “Assassin’s Creed”, and “The Elder Scrolls” in the wings, the excitement surrounding the video game industry isn’t likely to wane after this year’s E3.

You can invest in the video game industry right now on Stash.

The post E3 2018: Takeaways From the Gaming’s ‘Battle Royale’ appeared first on Stash Learn.

Americans pay $3.4 trillion per year for health care and related services, according to industry data. By 2025, health care spending will represent almost 20% of the entire U.S. economy.

And no one is exempt. The average American, who has an employer-sponsored health insurance plan, spends $6,690 annually for coverage, according to Kaiser Family Foundation. For a family, the average annual cost is $18,764.

Further, only around half of the U.S. population is covered by employer-backed plans. Which means that people are either going without coverage (9%), are using a government plan like Medicaid or Medicare (35%), or are on their own.

Insurance, too, is only one component of the massive and multi-faceted health care industry. It may be the component that most consumers are familiar with (along with doctor’s offices and hospitals), but the sector comprises many other pieces.

Scalpel, please! Inside the health care sector

From a consumer’s perspective, it may seem like the health care industry is nothing more than a gigantic money vacuum. But it is much more than that.

The sector is made up of public and private companies, non-profit organizations, and individuals that provide medical care and services (hospitals, etc.), produce and develop new medications and equipment (pharmaceutical and biotech companies, laboratory equipment manufacturers), offer insurance, and facilitate patient care.

Millions of people working in the sector also, in a variety of roles. While you may think immediately of insurance adjusters and nurses, occupations like dentists, yoga instructors, midwives, and acupuncturists are also employed under the health industry’s umbrella.

The sector’s key players include large insurance companies like UnitedHealth Group and Aetna, pharmaceutical companies like Merck and Johnson & Johnson, and many others, like medical distribution company McKesson, CVS Health, and pharmacy management company Express Scripts Holdings.

But the playing field is far from set. Many of the biggest companies in the sector have been merging, creating larger companies with a wider reach. CVS and health insurer Aetna, for example, announced their intent to merge late in 2017, which would marry one of the country’s largest insurers with one of the largest drugstore chains, which officially closed in November 2018. 

Other mergers are in the works, too, such as the proposed acquisition of another insurer, Humana, by Walmart.

Not willing to be left out in the cold, there are also companies on the outside who are looking to get in and disrupt the industry. Among them are Amazon, Berkshire Hathaway, and JPMorgan, which recently announced that they would team up to try and rattle the sector.

The sector’s economic gravity

Here’s the thing about health and medical care: Everybody needs it at one point or another. Which means there will probably always be customers, and money to make.

This is the primary reason the sector has such a massive amount of economic gravity. For proof, you really just need to dive into the numbers.

For one, the health care industry employs more people in the U.S. than any other. In 2017, the number of people working in health care surpassed the next two largest industries, manufacturing and retail.

The sector employs approximately 18 million people, according to the Centers for Disease Control, and 80% of them are women. It’s expected that the industry will continue to grow, too, with projections from the Bureau of Labor Statistics estimating that the health care industry will add 2.4 million new jobs by 2026.

These workers are paid relatively well, too, with median annual wages of nearly $65,000, nearly twice the national median income. But because the industry is largely subsidized by taxpayer funds–almost two-thirds of the industry receives taxpayer backing, worth approximately $2 trillion according to analysts–it eats up a lot of national resources.

The industry’s contributions

What type of benefits have Americans derived from all of that spending? For one, the average American’s life expectancy has increased considerably over the years. A child born today can expect to live to around 79, on average, according to the CDC.

For babies born in 1950, average life expectancy was only around 68. If you were born in 1900, it was around 47.

Improvements to sanitation, housing, and education have helped improved the quality of life worldwide. And most of the credit goes to the health care sector, which, in a variety of ways, has been the major contributor.

The health care industry is also one of the most innovative industries, and it would be difficult to list off all of the industry’s achievements and breakthroughs over the years. Those include the creation and discovery of vaccines, anesthetics, antibiotics, radiologic imaging, and more.

The (heart) beat goes on

Looking ahead, the industry’s set for massive growth according to industry analysts. America’s population is getting older, which is likely to translate into increased demand for health services, devices, and drugs.

In the near-term, unfortunately, health care costs aren’t expected to recede. Analysts are predicting that growing costs will outpace wage growth, tightening the financial vice on both households and the government. In 2018, PricewaterhouseCoopers projects medical costs to increase 6.5% over 2017.

A key issue facing the sector is uncertainty surrounding the law and regulations. That not only pertains to insurance companies grappling with regulations and rules under the current laws, but to pharmaceutical and biotech companies working on new drugs.

Despite those uncertainties, the industry’s biggest players can expect the profits to keep growing. Consumers, on the other hand, should probably plan to spend more on health care well into the future.

Want to learn more about investing in health care companies? Check out the themed funds and single stocks available on Stash.

The post A Look Inside the U.S. Health Care Industry appeared first on Stash Learn.

The Spartans and Mongol hordes of ancient times were embroiled in conflict—their cultures were defined by it. That’s a far cry from modern America, where only 3.5 million, or roughly 1%, of the population, are members of the military or Department of Defense.

Though a relatively small number of people actively suit up as members of the U.S. military, the costs of outfitting them have increased substantially over the years.

While a Spartan warrior needed only a spear, helmet, and shield to go to war, modern soldiers are equipped with much more than that; And often enter the battlefield in vehicles or aircraft that cost millions, if not billions of dollars.

To put it another way, modern defense is big business. It’s not merely banging on a piece of steel to produce a sword anymore. It involves researching and developing aircraft, satellites, and ever-bigger weapons.

And if President Trump is serious about getting his space army, he’s going to rely on that very same industry to get it.

What is the aerospace and defense industry?

The aerospace and defense industry comprises companies that produce aircraft and spacecraft for both military and civilian use. It also includes manufacturers of military equipment, vehicles, and weapons, such as missiles and bombs.

It does not, however, include companies that manufacture or sell guns and ammunition for hunting and recreational use. It also excludes companies engaging in non-aviation related commercial services at airports, like restaurants and shops.

Even excluding those industries, aerospace, and defense is a prodigious industry that employs tens of millions of Americans and drives billions of dollars in revenue every year.

16% of the national budget, or more than $600 billion, goes directly toward defense and homeland security-related activities. Most, if not all of that money ends up going to companies in the defense industry.

In 2016, the sector employed 2.4 million people in the U.S., and generated $872 billion in sales.

Though there are hundreds of active firms, some of the sector’s largest companies include Boeing, Lockheed Martin, and Northrop Grumman.

The American taxpayers pour an enormous amount of money into the defense and aerospace sector. While a lot of that money seemingly disappears into a black hole (literally, perhaps—you never know what DARPA is up to), a lot of it goes toward developing products and technologies that directly benefit the public.

So, what does the sector actually produce? Perhaps the easiest way to break it down is like a Navy SEAL: By land, air, sea, and beyond.

Land

While aerospace companies mostly operate in, well, the air and in space, defense companies produce all sorts of terrestrial weapons and technologies.

For example, military and defense contractors play a huge role in shoring up our national security measures, and the fact that most of America is relatively safe is due, at least in part, to these companies.

They build military bases and facilities to defend the borders, tanks and related vehicles for the military, and other arms and weapons.

Air

Defense and aerospace companies are always hard at work on next-generation fighter jets and military aircraft. They’re also churning out orders for the U.S. and other militaries, too.

One example is the current-gen Lockheed Martin F-35 Lightning II, which can cost more than $122 million per plane. Another is the General Atomics MQ-1C Gray Eagle, an unmanned aerial drone made by General Atomics for the U.S. Army at a cost of around $31 million per unit.

But while they do design and sell weapons and military equipment for governments, companies like Boeing also build airplanes for commercial enterprises, too.

Airplanes, for example, have become more efficient over the years. This has led to cheaper airfare and shorter trips.

Sea

Don’t forget about the ocean, which is not only incredibly important for national defense, but is rife with resources and is perforated with valuable trade routes. While most of our battles are fought on land and in the air, the ocean is still the world’s biggest freeway for international trade.

And while it may not seem like much has changed in ship or seafaring technology over the years, defense companies are hard at work creating next-generation ships and floating fortresses with which the U.S. and other countries can engage in military operations.

A prime example is the Navy’s newest aircraft carrier, the USS Gerald R. Ford, which was commissioned in July 2017. The nearly $13 billion ship is the world’s largest aircraft carrier and will carry the F-35 fighter jet, among others.

Space

While there’s still a need for classic military and defense equipment, the future of the sector may lie far beyond the sky—in outer space.

The U.S. and other countries have traditionally used public funds to pay for space travel and exploration, but we’re starting to see more private capital and investment enter the market.

Companies like Blue Origin and SpaceX, both founded by billionaire businessmen, are becoming integral parts of the American space program, and could soon start ferrying paying passengers past the stratosphere and into orbit.

There are also national security implications, as President Trump recently laid out in his idea for a space-based branch of the military, which could further increase public investment in the sector.

The sky may be the limit for some industries, but this probably isn’t one of them.

Want to explore the world of aerospace and defense? Check out these sector-related funds and single stocks available now on Stash.

The post What is the American Aerospace and Defense Industry? appeared first on Stash Learn.

The company recently announced that it plans to stop production of all sedans, and instead focus on building trucks and SUVs.

Effectively, this means that Ford will no longer make models like the Taurus, Fusion, and Fiesta. Instead will only offer two cars stateside: The Mustang and the Focus Active crossover, which is due out next year.

Effectively, Ford is going all-in on SUVs and its massively popular F-Series pickup trucks.

Why is Ford shifting gears?

The short answer is that Ford’s cars are slow-selling and offer lower margins than the company’s other models. Car sales have been on the decline for years, and the company’s executive team is aiming at profitability—a goal more easily achieved by cutting fledgling models loose.

By 2020, almost 90 percent of the Ford portfolio in North America will be trucks, utilities and commercial vehicles.

“Given declining consumer demand and product profitability, the company will not invest in next generations of traditional Ford sedans for North America,” Ford’s quarterly earnings statement said.

American consumers are buying more trucks and SUVs, and Ford’s strategy reflects that. The company makes several SUVs, like the Escape, Explorer, Edge, and EcoSport.

It’s even reintroducing once-extinct models, like the Ranger and Bronco–all in an effort to sate Americans’ demand for bigger vehicles.

The raw data

Ford’s strategy change is an effort to keep pace with Americans’ changing tastes. People want bigger cars, and that’s what they’re buying. As a result, sales of smaller models have been on the decline.

For example, as of the beginning of April 2018, Ford has sold nearly 215,000 F-series pickups. That’s more than twice as many sales of the Toyota Camry (~91,000), the country’s best-selling car so far this year, according to industry data.

Of the top 20 best-selling vehicles in America, 14 are SUVs or pickups. The rest are cars, but all from foreign competitors, according to industry data.

Car wars

Foreign competition is another reason Ford is forfeiting certain segments of the market. The “Big Three” American automakers—Ford, GM, and Chrysler—are being dominated by companies like Honda and Toyota in the small vehicle space.

Ford isn’t alone in throwing up the white flag. GM also recently announced that it would stop making models like the Chevrolet Sonic and Impala, as sales have plunged in recent years. Fiat Chrysler is likewise making changes to its lineup. The Dodge Dart and Chrysler 200 sedans were cleaved from dealerships as it, too, tried to keep up with changing demand.

What’s spurring sales of SUVs and trucks?

In part, it’s due to economic conditions. The economy is in good shape, and gas prices have been relatively low since topping out at more than $4.00 per gallon, on average, in 2008.

Back then, at those prices, drivers were desperate for smaller, more efficient cars.

But now, with gas prices averaging around $2.50 per gallon, a dollar’s worth of gas will get you further. Gas prices are, however, rising.

What does it mean for you?

While your new car options are obviously limited when Ford enacts its new strategy, there are some economic side-effects that can reach beyond the auto industry.

Investors, on one hand, will likely benefit as Ford’s plan to slash spending and become more profitable fleshes out. But getting there will require hitting some bumps in the road, including plant closures and layoffs.

The post Ford to Abandon Car Production In Favor of Trucks and SUVs appeared first on Stash Learn.

It’s a great question, and I wanted to take a moment to describe how we make our decisions.

How we choose funds

When it comes to selecting the funds we offer on Stash, we have a very deliberate and purposeful investment strategy. In fact, all of our decisions begin with an internal investment committee that carefully screens every fund and stock that you can purchase, with a goal of giving you the broadest exposure to the market possible.

We primarily offer exchange-traded funds (ETFs), which are baskets of securities that trade on an exchange, and either follow an index or some other specific set of investing guidelines. Our objective is to offer ETFs that are straightforward and follow a transparent process for security selection, based on concrete rules.

By holding these types of funds, we think investors can reduce risks that the performance of their holdings will deviate significantly from the indexes that the ETFs track, or the investment approaches that the funds have chosen.

In short, you as investors will have an idea how your investment can perform over time, based on market conditions.

Investing in what matters to you

That goes equally for a fund that may follow an index of companies that have social goals to promote worker equality, or one that might follow the stock picking strategy of large hedge funds.

Stash also chooses ETFs from the leading fund providers. Blackrock’s iShares, Charles Schwab, PIMCO, State Street Global Advisors, and Vanguard, are a few of our fund companies, and they are among the most recognized names in the investment world. These companies have long track records creating some of the most successful funds in the industry.

Additionally, our ETFs represent important economic sectors, which will can give  you the broadest possible exposure to markets. These include equity funds that focus on consumer staples, energy, financial services, healthcare and technology, to name a few. The funds also allow you to invest in both corporate and government bonds.

We want the mission of each fund to be clear, so our investors know what they’re buying.

All of our funds must also follow easily recognizable themes. For example, our funds might follow companies innovating in sustainable energy, or pushing the envelope on robotics, or companies actively seeking to conserve and supply water globally.

Finally, while accounting for all the considerations above, we try to minimize the costs associated with owning and trading an ETF, to help you maximize your returns.

You can buy fractional amounts of those funds, starting with just $5, making it simple to invest in a lot of things that interest you without spending a lot of money.

Explore all the funds we offer on Stash here.

How we choose single stocks

But Stash also lets you purchase single stocks of several dozen prominent U.S. companies. (More specifically, we let you buy fractional amounts of those stocks, as the individual price per share of some stocks might be quite high.)

And many of the same principles we apply to picking our ETFs, we also apply to the stocks we offer for sale. We choose primarily “blue chip” stocks, from some of the largest and most easily recognizable companies in the world. These companies typically have a long record of trading, with strong revenue, and profits.

The individual stocks we offer must also be from companies that have a market cap of at least $10 billion, and they must be liquid stocks.

That means there’s typically a high market demand for the shares, and they can be easily bought and sold by investors. The individual stocks we choose also can’t be thinly traded, which means the volume of shares traded on a daily basis must exceed $50 million.

Most important, we try to offer stocks that you’ll be interested in. These include a broad range of selections, from innovative technology companies to classic U.S. consumer products companies.

What you won’t find Stash selling are lesser-known stocks that are traded on unknown exchanges, or stocks from foreign companies that haven’t established a significant U.S. presence.

Explore all the individual stocks we offer on Stash here.

We’re always working for you

Here’s something else to keep in mind: Every quarter we carefully monitor the individual stocks we offer. If they fall below our criteria, we remove them from our list.

At Stash, our goal is to help you build a diversified and successful portfolio that will allow you meet all of your financial goals, whether that’s purchasing a home, saving for retirement, or some other objective with your money. We want to be here for you now, and in the long-term.

The post How Stash Chooses Investments To Help You Build Your Portfolio appeared first on Stash Learn.

How is it, then, that the industry has been allowed to take root? And how, as an investor, are you allowed to well, invest in it?

How can I legally invest in the business of cannabis?

Those who wish to legally invest in the business of cannabis have options. They can invest in legal cannabis companies that are registered in other countries (such as Canada), or invest in companies that don’t directly interact cannabis plants — they don’t grow, process, or distribute marijuana.

I’m confused. I thought marijuana was an illegal drug.

Marijuana is illegal at the federal level, as it’s a Schedule 1 controlled substance. But for many years, it’s existed in a sort of legal gray area in many states.

Using marijuana for medicinal purposes, for example, is legal in 29 states. In eight states (and Washington D.C.) it’s been legalized for recreational consumption. These state laws are at odds, however, with federal law.

Whether or not the federal government takes action against industries operating within and complying with these states laws has changed from administration to administration. Under President Obama, for example, federal law enforcement agencies were instructed not to interfere with the industry, given that state laws were being followed.

The Trump administration, on the other hand, reversed that policy.

So, companies in the U.S. working in the cannabis space are at risk of being fined or shut down as working with cannabis breaks federal law.

Why are many cannabis companies listed on Canadian exchanges?

While some publicly-traded cannabis firms are based in the U.S., they’ll list shares on international exchanges as a response to concerns about federal crackdowns or legal intervention. Many cannabis and cannabis-related companies list their shares on Canadian exchanges, for example, because Canada has announced plans to fully legalize marijuana.

As for publicly-traded domestic companies operating in the marijuana industry, many play a supporting role in the marijuana industry. Kush Bottles (ticker: KSHB), for example, is a U.S.-based company that makes storage containers for marijuana, but doesn’t produce or process it.

All of the above is very different from investing in the farming, growing, or distribution of marijuana. And that difference decreases the risk that the company could be shut down or fined by the federal government.

Can Americans legally invest in publicly-traded stocks and funds related to the business of cannabis?

Yes. There are companies both here and abroad that engage in the lawful creation, marketing or distribution of products that utilize cannabinoids as an active ingredient. This can include tobacco, fertilizers, plant foods, pesticides, as well as real estate and personal health products. It’s always a good idea to do your due diligence and check a stock or fund’s prospectus before purchasing an investment.

Learn more about investing in the business of cannabis.

The post If Cannabis is Illegal Under Federal Law, How Is It Legal to Invest In It? appeared first on Stash Learn.

They’re a wonder of technology—pistons, gears, valves and wheels, streaming along highways and roads all over the world. For many, cars mean freedom, and the ability to pursue work and travel far from home. Cars also mean convenience. Need groceries ten miles away? No problem.

Cities have grown larger because of them, as residents have moved 20 miles or more from from urban centers–and the suburbs couldn’t exist without them. Numerous industries depend on car manufacturing and sales to continue operating—think oil for gasoline, rubber for tires, and plastics for the innumerable components that go into cars.

And let’s not forget the trucking industry, that moves the products consumers depend on from one corner of the country to another, is also an outgrowth of the automobile. In 2017, revenues for this industry alone were three quarters of a trillion dollars.

In fact, from the days that the first Model Ts sped off the assembly line at a Ford factory more than 100 years ago, to today’s electric-powered Teslas, cars have shaped society and the world we live in. They have allowed us a kind of mobility that previous generations could never have imagined.

Cars drive the economy

Certainly car manufacturing and sales are huge economic drivers. There are about 1.5 billion cars on the planet, and that number is expected to grow to 2 billion by 2040. In 2017, some 88 million cars sold worldwide, and nearly a quarter of those were sold in the U.S. alone.

In the U.S., automobile manufacturing and sales contribute up to 3.5 percent of the U.S. economy, according to research. As an industry, they are the biggest manufacturing and retail segments combined, employing close to 2 million people who either work directly for the big manufacturers, or for companies selling parts and manufacturing components as suppliers, not to mention sale of the vehicles themselves.

Furthermore, workers in the industry earn some $500 billion annually, according to industry research.

The so-called Big Three automakers in the U.S. are Chrysler, Ford, and General Motors. These companies were at one point the largest manufacturers in the world. Today, they are still critical to the economy, but in recent years have been joined by foreign auto manufacturers including Honda and Toyota, which employ some 100,000 workers in the U.S., in addition to their workers overseas.

Cars and climate change

While cars are a huge part of the economy, they’ve taken a physical toll on the planet. Cars contribute to the warming of the earth’s atmosphere, dumping billions of tons of carbon into the atmosphere each year.

Auto sales and dealerships are an industry in their own right, contributing up to 2.6% of gross domestic product

The Environmental Protection Agency (EPA) estimates that about one-third of all greenhouse gases are caused by cars and other forms of transportation that use petroleum fuel. And traffic-related deaths—about 1.3 million people annually die from car accidents around the world—are also a significant concern.

Car makers are aware of the problems, and they are innovating at a fast and furious pace, with manufacturers focusing on making automobiles that are more energy efficient, safer, and—soon—driverless.

Additionally, fuel efficiency has increased over the years, and cars now average about 25 miles to the gallon, an increase of nearly 30% from 2004, according to the U.S. Environmental Protection Agency.

And all of the major car companies now have electric models or hybrids whose motors switch between gas and electric.  As much as five percent of all sales will be for all-electric vehicles in the next ten years, according to recent research.

The future of the car industry

Meanwhile, car companies are some of the biggest innovators around. Whether it’s coming up with the first idea for a moving assembly line more than a century ago, to today’s “just in time” template that conserves time and resources by producing what’s needed only when it’s necessary.

Manufacturers including Chrysler, Ford, General Motors and Tesla are working on the next generation of automobiles. They are using the latest technology, including computer software, high-power lithium-ion batteries, radar, cameras and even lasers to ensure cars run more efficiently, use fewer resources, and keep people safe.

Good to know: Airbags, which were at one time controversial, have saved an estimated 45,000 lives since they were first introduced in 1987, according to the National Highway Traffic Safety Administration.

Collectively, these companies know they must respond to challenges ahead.

Some day soon, driverless cars may become the norm. That could mean having a fleet of shared cars circling neighborhoods, ready to take you grocery shopping, or safely home after a big night out.

“My guess is that in probably 10 years it will be very unusual for cars to be built that are not fully autonomous,” Elon Musk, the founder and chief executive of Tesla said recently at a summit of world leaders.

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