What it is:
The healthcare sector is the sector of the economy made up of companies that specialize in products and services related to health and medical care.
How it works (Example):
The healthcare sector includes publicly-traded companies that power all dimensions of the healthcare industry. Examples of these companies include, but are not limited to, biotechnology companies, health insurance providers, pharmaceutical companies, and companies that manage clinics and hospitals. Companies that produce professional and home health products (for example, blood-pressure monitors, Elastoplasts, orthopedic devices, and surgical supplies) are also included in this sector.
Why it Matters:
Due to the indispensable nature of healthcare at all levels of society, stocks issued by companies in the healthcare sector are somewhat insulated from the business cycle. Investors may be able to defend against fluctuations in the overall market by building a portfolio that includes healthcare sector stocks.