New Sector - Real Estate

Submitted by Academy Wealth Advisers on August 24th, 2016

Written by Rick Welch on August 24, 2016

Recent long term studies of stock return differentials suggest that industry sectors may be a more important component of equity returns than market cap and style combined. Used in this context, a sector is an industry classification or grouping of companies sharing common characteristics. The most common classification of industry sectors, the Global Industry Classification Standard or GICS, divides the equity universe into ten major sectors: Consumer Discretionary, Consumer Staples, Energy, Financials, Health Care, Industrials, Information Technology, Materials, Utilities and Telecommunications. Earlier this summer I published an article entitled "Sector Investing" which can be found at this link:

www.academywealthadvisers.com/sector-investing

And now there will be 11 sectors. Since the development of GICS in 1999, there have been no changes to the number of sectors until the planned revision to the Financials sector (beginning on September 1st) when Real Estate (a member category within Financials) will be removed and become the new 11th industry sector. The new Real Estate sector (mostly REITs or real estate investment trusts) will comprise approximately 3% of the S&P 500.

What should investors do now? Nothing, just be aware of this sector change which may require some adjustments to your long term asset allocation plan. Most changes will be minor and be made over the next month.

For more reading on this topic, I recommend the following two Schwab articles:

Schwab Sector Views: There's a New Sector Coming

http://www.schwab.com/public/schwab/nn/articles/Sector-Views?cmp=em-SCK%...

Introducing the Newest Sector: Real Estate

http://www.schwab.com/insights/personal-finance/introducing-newest-secto...