You have heard it from lots of pundits in the Stock Market. Invest in the right sectors, and you'll make big money. It sounds easy enough, but experienced investors know that, in fact, it is not easy at all. Just because you have some idea which sector is the proper one to invest in, doesn't necessarily mean that you will pick the right stock as the proper investment vehicle into which to put your hard earned money. If picking stocks in sectors were so easy, there would be lots of rich billionaire stock investors out there in the world. The truth is, picking the correct stock to invest in is really hard work, especially when it comes to sector investing. What is an investor to do?

First, let's examine exactly what sector investing really is. There are lots of sectors in the Stock Market. A sector is simply a grouping of stocks according to similar business activity. For example, a commonly recognized sector is that of technology. A technology stock is a share of a company whose main business activity lies in the area of computers, the internet, or some related business niche. Another well known sector is that of industrial stocks. Generally speaking, industrials are shares of companies that manufacture some kind of object or device necessary to other businesses. Some industrials produce devices for comsumers too. The list of sectors goes on and on.

The reason that sector investing is so important is that economies go through cycles. The start of an economic cycle is usually an improvement in general production and an accelerating development of business activity in many areas of the economy. Next comes a boom. After the boom, comes a recession, and then it all starts over again with another period of recovery, including another rise in production. At the beginning of a business cycle, like the one we are in right now, certain sectors in the Stock Market perform better than others. Generally speaking, in the early period of a business recovery, sectors like industrials, cyclicals, financials and commodities do the best. Technology also does well in an early business cycle because businesses are looking to upgrade their computers and their productivity. Transportation stocks also tend to do well in an early business cycle. But just because you analytically know where the economy is in the business cycle, and you also know which sectors tend to perform the best in that part of the cycle, doesn't necessarily mean that you can blindly pick just any stock in a sector and make money. In fact, lots of stocks in the proper sector will not do well, and they won't do well for various reasons.  

So how does one pick the good stocks in the right sectors? Well, lots of folks have their methods for going about this process, and so do I. What I am going to share with you now is how I do it. It's really not rocket science. In fact, I have to admit that sometimes I am a bit ashamed at how easy I have made it for myself. So, here goes. I am going to tell you how I do it. Simply stated, I use my computer. I go to: www.barchart.com and let the fine people there do the work for me. The great thing about this site is that it is free. So, you can go there, and look at the top of the home page and see that there are lots of choices. For sector investing,  I go to the section marked, "Sectors." I click on it, and lo and behold, the fine people at barchart show me what sectors are performing the best, and which stocks in each sector are leading the pack. The good thing about this site is also that they break down their sectors into very specific areas of stocks. Right now, for example, their top five sectors are: 1) Top 100 Stocks, 2) Mining - Gold, 3) Precious metals and Jewelry, 4) Appliances - Household, and 5) Printing - Commercial. If you click on each of these headings, the good people at barchart give you the stocks they consider to be part of that particular sector. Not only that, they also rate the stocks in each category, giving you a complete rating and how these stocks have performed so far this year. This site is a gold mine for any potential investor.

Another section at the top of the home page is called, "Signals." I recommend you become very familiar with this section. It is especially good for shorting stocks. Why? Well, what you get in this section is a list of the hottest of the hot stocks in the market. These stocks have been going up for a long time, so they are generally ready for corrections. Do not fall into the trap of picking one of these hot stocks and expecting big profits from your investment. Chances are, you will be disappointed. But for those of you who like to short stocks, this site and this particular section of Barchart is a great way to find candidates for shorting. Look at this section and study it carefully. The stocks listed in the "Signals" section change every day, and some stocks stay for a while and then leave the list. Study this section every day. You will be glad you did.

Finally, remember to return to the "Sectors" section and look at some of the sectors that are up and coming parts of the economy. In other words, try to resist picking stocks in a sector that have been hot for a long time. Look at sectors that have been doing well and up and coming in the business cycle. These are the stocks that offer the best potential for an excellent return of your investment.

By utilizing Barchart.com, you should be able to find the right sectors and the best stocks for your investments. And as always, it is smart to try a few paper trades before you invest your own money. Pick a stock or two from the "Sector" list and pretend that you are buying a thousand shares. Then watch it for a while and check to see if you have picked wisely. IT COSTS YOU NOTHING TO PAPER TRADE, AND YOU CAN LEARN A GREAT DEAL ABOUT YOUR STOCK PICKING STRENGTHS AND WEAKNESSES. A few paper trades will help you gain confidence for the time in the future when you choose to invest your own hard earned money. By that time, you should be quite confident that your sector trading is going to make you a handsome profit.

John K. Brackett, Ph.D.

All Rights Reserved

For questions or comments,  contact John Brackett at: www.Xomba.com/JKB3000 or JKB3000@live.com

#ff0000