Information Technology Sector

The information technology sector is one of the ten Global Industry Classification Standard (GICS) economic sectors. Sometimes referred to simply as the “technology sector,” it encompasses companies engaged in research, development, and/or distribution of technologically based goods and services. This sector contains businesses focused primarily on manufacturing electronics, creating software, developing computers or other electronic products, as well as the services relating to information technology and support for these devices.

The information technology sector is one of the ten Global Industry Classification Standard (GICS) economic sectors. Sometimes referred to simply as the “technology sector,” it encompasses companies engaged in research, development, and/or distribution of technologically based goods and services. This sector contains businesses focused primarily on manufacturing electronics, creating software, developing computers or other electronic products, as well as the services relating to information technology and support for these devices.

The technology sector is literally the sector of the future, and it typically rests on the cutting edge of scientific advancement. As such, this sector offers a wide range of products and services for both customers and businesses. Consumer goods like computers, mobile phones, and televisions all fall into this category and represent the types of products that continually experience improvements and upgrades. Software for individuals and businesses, information networks, and internet and hosting services also fall under this category, as do the tech support services all of these products require.

Importance

While the information technology sector may not serve as an economic indicator in the same way the consumer discretionary sector does, it is still very influential on the rest of the economy. Every other sector depends on advancements in the information technology sector in order to achieve greater levels of productivity, accountability, innovation, and growth through automation.

Information technology also experiences rampant competition and rapid cycles of product obsolescence. For example, most mobile devices are obsolete and replaced by a beefed up version at least once a year. Computer processing power tends to double every year and digital storage capacities grow, while the size of products tends to shrink. Today, the phone in one’s pocket is likely several magnitudes more powerful than the most expensive consumer computers available just five to ten years earlier. With that constant drive to innovate and compete, no company in the information technology sector can rest on its achievements or it will be out of business almost immediately.

This rapid cycle means industry leaders do not necessarily retain that position for very long. While Microsoft and Apple have been two of the most notable exceptions, even they have experienced their fair share of position jockeying throughout the life of their corporate existences. Because of these dynamic changes and impressive growth, information technology is a sector that many investors use for growth and high returns in their portfolios.

Investing in the Information Technology sector

Investment options abound in the information technology sector. From capital venture to individual stock investments, and hundreds of mutual and exchange-traded funds (ETFs), there are many ways for investors to sample this sector. However, it is not for everyone. Many investors dislike the volatility and dynamic nature of this sector and stay clear of it. Given the importance of this sector, however and its influence on the other economic sectors, staying away from information technology entirely is almost impossible. For those reluctant to become involved in information technology, a better approach may be to thoroughly research and follow the trends for well-established and long-standing companies like Apple, Microsoft, Hewlett-Packard, Sony, and others. These companies may have a more stable ebb and flow than newer market entrants.