What sectors should i invest in 2011

List of Partners vendors. Just like people, stock market sectors seem to have their own personalities, with some sectors exhibiting much more volatility than others.

Some sectors bounce around over the short term, with prices fluctuating rapidly up and down like a yo-yo. Other sectors are relatively docile and move more slowly, with small changes in prices at a steady pace over long periods of time.

In this article, we'll discuss the eight stock market sectors representing the industries that have shown the most volatility over a sustained period of time. Volatility may be caused by a variety of factors—among them are trader emotions like fear and panic.

Sometimes referred to as " noise trader risk ," this is the risk associated with trend-following traders who succumb to their emotions, causing massive sell-offs or buying sprees. In a jittery, uncertain market with nervous investors, major news events, both positive and negative, can cause big price moves, either down or up.

Wars, revolutions, famines, droughts, strikes, political unrest, recessions, depressions, inflation, deflation , bankruptcies of major industries, and fluctuations in supply and demand can all cause stock prices to drop precipitously. Some big hedge funds and private equity firms, with excessive debt incurred due to financing stock market investments, have been forced to sell assets in a declining market to pay off margin calls. These large-lot sales also cause big swings in stock prices.

Here we list in descending order the top 8 sectors with the highest standard deviations. Standard deviation is a calculation applied to the annual rate of return of an investment and measures the investment's volatility. Industries in this sector include oil, gas, coal, and renewable energy technologies such as biomass, geothermal, hydrogen, hydro-electric power, ocean energy, solar, and wind energies.

During the s, this sector had the highest standard deviation of Coming in with the second-highest standard deviation of Commodities are a range of physical goods including natural resources, precious metals, and agricultural goods. If you were to invest in this sector through a commodities exchange-traded fund ETF , your holdings might include exposure to such products as gold, silver, oil, gas, grains, or beef. Banks, brokerage firms, financial services , insurance companies, credit card issuers, financial planners, securities exchanges, and commodity exchanges form the bulk of this sector.

This sector experienced tremendous volatility during the financial crisis and the Great Recession that followed. For the s, the financial sector's standard deviation came in third highest at The technology sector includes a wide range of goods and services.

On the consumer side, it includes goods like personal computers, mobile phones, televisions, and household appliances. For businesses, the sector provides hardware, enterprise software, cloud-based computing, and logistics systems. Well-known companies in this sector include Apple, Amazon, Google, and Microsoft. The consumer discretionary sector came in close behind the technology sector with a standard deviation of Included within this sector are retailing, media, consumer services, consumer durables , luxury goods, apparel, automobiles, and auto parts.

Additional industries in the consumer discretionary sector include hotels, restaurants, and leisure. The communication services sector ranks next with a standard deviation of The major companies in this sector include phone services, wireless communications services, cable providers, data services, Internet services, equipment manufacturers, media, and entertainment.

Repeat the process each year. The strategy has an impressive track record. The three sector winners produced a That beat a portfolio of the three sector losers, which rose 8.

The sector winners carried slightly more risk, but their extra return compensated for the bumps. Momentum investing flies in the face of the long-term oriented advice that individual investors typically hear. Conventional advice eviscerates hot-hand investing as little more than gambling and market-timing, and to be sure, momentum strategies can fail miserably.

For example, the three best sectors of tumbled Letting your winners ride also fell short in , when the three winners gained The winning sectors also trailed slightly in and So be careful.

Letting your winners ride is a short-term play — no more than 12 months — that requires a high level of discipline and progressively higher stop-loss orders to protect your gains. Yet on a year-by-year basis, the odds favor momentum buyers. But in fact you might not be too late to the party. Those years when sector winners stumbled offer clues about when and why momentum investing fails. Momentum strategies need market sentiment to move in an upward direction for an extended period.

With the market roaring back after a 9 percent drop in October, it is up more than 50 percent in the last two years and hasn't had a more than 10 percent correction since the summer of Valuations may have more influence in the market now than business-cycle factors, said David Grecsek, director of investment strategy and research at registered investment advisor Aspiriant.

We'd be happy with a good bunt at this point. Skip Navigation. Read More Biggest stock 'bubble' mistakes The first is the relative weakness of consumer spending since the financial crisis.

Get real: Advisor Reading the business cycle accurately may help anticipate how sectors will perform relative to each other, but it won't save you from major market corrections—which usually happen in the midcycle period. All of Buffett's bad bets add up to a big year. Eric Rosenbaum. How harvesting losses reaps tax savings. Kelley Holland. Late Christmas shoppers can't save your portfolio.

Eric Chemi.