Markets

The 3 Best Sectors for Long-Term Earnings

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There are so many different sectors to choose from when it comes to investing, so here's a look at the top three sectors for long-term returns.

1. Technology sector

Often considered to be the most glamorous sector in investing, technology boasts some of the biggest company names in the world such as Apple (NASDAQ: AAPL)Microsoft, and Amazon.com (NASDAQ: AMZN). Aside from these behemoths, the tech sector has thousands of other, smaller companies, many with huge profit margins operating behind the scenes -- had you ever heard of Shopify before it went public?

In terms of returns on investments, technology is not always going to be a sure thing, as the past decade has shown it to be a temperamental area. In fact, the sector offered the highest returns of all ranked market sectors at 50% in 2009 and 34% in 2017, while also underperforming the average of all sectors in 2008, 2010, 2011 and 2013.

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What makes tech stocks such an exciting investment is the sheer diversity and constant growth, with areas including artificial intelligence, smartphones, software as a service, and countless other avenues. One need only look at the top-performing stocks this century, and 4 of the top 10 are in tech, including Apple.

2. Health sector

The health sector is an area that has a history of volatility -- particularly in the pharmaceutical industry -- and many investors may avoid it due to the advanced knowledge required to understand what many of the companies are doing. U.S. health spending represents a huge opportunity for investors, however, totaling $3.7 trillion in 2018 alone.

Much like the tech sector, the health sector is ever-growing and limitless due to the increased capabilities of technology. Advanced medical technology can range from improved x-ray imagery to enhanced surgical tools. Health and tech stocks can overlap, and both have the potential to become solid long-term investments thanks to innovation. They have also been known to work together for the betterment of one another.

The pharmaceutical industry alone is worth more than $500 billion in the U.S., and some of the biggest corporations in the world belong to this group. One example of the kind of returns one can expect from healthcare investments is Gilead Sciences (NASDAQ: GILD), which has seen a 47% increase in dividend payouts since 2015.

Health data is an area that has the potential for massive growth. Ever-increasing and aging populations and an increase in chronic diseases requires the health sector to amass and store massive amounts of health data. Electronic health record companies are on the rise, with big tech players such as Amazon and Apple getting in on the action. 

Global healthcare expenditures are expected to continue to rise as spending is projected to increase at an annual rate of 5.4% between 2017 and 2022, from $7.724 trillion to $10.059 trillion, so now may be a great time to get in on health.

3. Financial sector

We know what you're thinking about finance -- yawn -- but as boring as the financial sector might sound for investing, it is also a formula that's been tried and tested through the years. Many equate the entire sector with Wall Street and big banks, but there is a lot more to it than that. The sector is actually one of the most important factors behind a healthy economy.

One might think of the Great Recession of 2008 and believe that finance is a risky investment. There is some truth to this, yet it is no more risky than any investment, including tech or healthcare. If you look at the biggest companies in finance, you will see a large portion of them dominate the S&P 500, including American Express, Bank of America, and Berkshire Hathaway

With the financial services market expected to grow 6% and reach a value of roughly $27 trillion by 2022, investing in the sector may be worthwhile. In recent years, the industry has seen its share of disruptors, such as PayPal and Visa. With technology continuing to advance and an explosion of alternative payment tech hitting the markets, there is still plenty of room for more disruptive innovation.

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MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in Amazon, American Express, Apple, Microsoft, PayPal, and Visa. Read our full disclosure policy here.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. The Motley Fool owns shares of and recommends Amazon, Apple, Berkshire Hathaway (B shares), Gilead Sciences, Microsoft, PayPal Holdings, Shopify, and Visa. The Motley Fool has the following options: short January 2020 $155 calls on Apple and long January 2020 $150 calls on Apple and recommends the following options: long January 2020 $150 calls on Apple, short January 2020 $155 calls on Apple, long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), long January 2021 $85 calls on Microsoft, short January 2020 $220 calls on Berkshire Hathaway (B shares), and short January 2020 $97 calls on PayPal Holdings. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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