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The stockmarket classifies every stock within a certain sector. Vodafone is in the telecoms sector while HSBC is in the bank sector. Sometimes traders or investors prefer to buy into a whole sector rather than try and stock pick a certain share within that sector.

Other traders like to operate a long-short strategy where for example they may be bullish on the Oil & Gas sector while going short the Health sector. Trading long/short in this fashion is how hedge funds used to trade when they were first set up over 30 years ago, hence the name Hedge Funds

The spread betting companies now offer what they refer to as sector spread bets where you can easily speculate on potential up or down moves within all the different stockmarket sectors.

Sector Constituents

The shares within each sector are normally based on the same shares within the sectors classified by the London Stock Exchange. Each sector is a capitalisation-weighted index of the relevant companies. Therefore a very large stock like Vodafone will carry a significantly higher weighting on the index that a far smaller capitalised stock like Colt Telecom. You can see an example of this on the next page.

Spread Betting companies normally quote around 30 different sectors which are listed below;