% of portfolio in one "sector" - What constitutes a sector?

S

Skibbs

I have always heard as a general guideline that your portfolio should never exceed 25% of its capital in one sector, or around 10% in one stock.

My question is, what necessarily constitutes a "sector".

Is Energy (which can comprise of oil, natural gas, coal, uranium, etc) an industry or sector? Or are the types of energy I have in parenthesis the sectors?

Is Metals (which can comprise of Steel, Copper, Gold, Silver, etc) an industry or sector? Or are the types of metals I have in parenthesis the sectors?

I ask because I find myself lately being very heavy in commodities but am unsure on whether I am exposing myself to too many stocks that are in the same sector.

It seems that there is a gray area in this matter. Even some have told me that "commodities" which would include everything in Energy and Metals is a sector.

Any clarity that could be given would be great, thanks.
 
Quote from Skibbs:

what necessarily constitutes a "sector"?
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Gold
Consumer Descretionary
Consumer Staples
Energy
Financials
Healthcare
Industrials
Basic Materials
Technology
Utilities
Bonds
International (Emerging Markets)

- Spydertrader
 
A better way to think about it is to say have no more than 20% in any one IDEA. Sectors can be highly correlated.
 
Quote from Arnie:

A better way to think about it is to say have no more than 20% in any one IDEA. Sectors can be highly correlated.
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I think about it more like don't let your ideas add up into an unintended sector bet.
 
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