Review and Analysis
The services sector has in modern times succeeded the industrials sector as the lifeblood and core of economic activity in the economies of nations across the globe. In the USA alone, the services sector accounts for more than 70% of the country’s gross domestic product (GDP). Naturally then, as the biggest and most active sector, the services sector includes big and hugely profitable companies, whose stocks rightly attract the attention of hordes of investors.
This being said, and though opportunities for profit are lurking in every corner of the massive services sector, investing in services stock without proper and due diligence and devoid of adequate knowledge on the sector, could well prove catastrophic. To help interested investors discern if a services stock investor is the right one for them, let us explore the services sector stocks further and highlight the advantages and disadvantages of such an investment move.
What Are Service Stocks?
Service stocks are the stocks of companies falling under the service sector. This is comfortably the biggest sector of economic activity, both in terms of income generation but also in terms of the numbers of companies involved in the provision of services, which encompass a widely varied spectrum. The main services companies, are active in the following fields:
- Technology: perhaps the largest subset of the service industry and one that is constantly on an expansion mode since it includes companies that deal with e-commerce, web and database hosting, artificial intelligence, cloud computing etc.
- Medical services: this subcategory of service companies includes hospitals, nursing homes, at-home nursing services and all the services which focus on delivering health care to those needing it.
- Utilities: Utility services form another sizeable subcategory of the services sector and include those companies which concentrate on the provision of services that are essential for human life, such as the provision of water and electricity, garbage collection and sewage services.
- Financial services: This subcategory is densely populated and holds great earning potential, as it includes various companies that offer services pertaining to the movement and management of money, such as banks, brokers and hedge funds.
- Media services: Another significant subgroup within the services sector, including companies in the news business, all types of media, print, online and audiovisual, social media, and wide spectrum of entertainment companies, including film production.
- Transportation services: Yet another sizeable and important subgroup in the services sector, transportation services include all companies offering transport for people, such airlines, seafaring, train companies, bus lines, taxis and many others.
- Consumer Discretionary Services: The final important subgroup in the services sector, which lies on the direct opposite end from utilities, are consumer discretionary services, which are services that are not essential in people’s daily lives, but rather “luxurious” which consumers seek to obtain when their income levels allow them to do so.
By the end of the guide, you should know the following:
- If Services stocks is a good or a bad investment.
- How to buy Services stocks.
- Where to buy Services stocks.
- Which Services share is best to buy now?.
- Services stock price prediction: Where Will Services stock Be in the next few Years?
Pros and Cons of Buying Services stock investment
Services Pros and Cons
|Attractive and hip
||Services are evolving fast
|Stable Growth and Dividends
||The sheer size makes navigation difficult
|Offering the Feel-Good Factor
||Education on the Entire Sector Is Difficult
The Benefits of Services stocks investment
Being so big and diverge the services sector has its own distinct pros and cons when considering an investment in the stocks of service companies. Being aware of the upsides and downsides of such an investment will help you discern whether you should all services stock to your portfolio.
There are indeed several benefits and advantages to investing in the stock of services companies, as opportunities are lurking everywhere in the sector that accounts for the vast majority of the US GDP. The main pros of such an investment are:
- Attractive and hip:
Not all service stocks can be characterized as exciting and cool, but the truth is that a great number of them appear very attractive in the eyes of investors, because the type of services comes across as interesting, exciting, and hip to be part of. Prime examples of services stocks that offer this cool effect to investors are the stocks of technology and media companies, as both these industries are exciting and interesting to know about. This makes investors more eager and willing to do the research and due diligence needed prior to investing in such companies, as they don’t find it dull to learn about new technologies or the glossy world of media and entertainment. In turn, the willingness to research and learn leads to more educated investment decisions, thus turning into a significant strategic advantage, maximizing an investor’s chances for success and profit.
- Stable Growth and Dividends:
One particular subsector of the services stocks sector which is ideal for investors who are after stocks offering strong dividend yields and enjoying a strong track record of stable growth is the utility services subsector. By offering services that are absolutely essential and necessary to consumers, utilities are considered as consumer staples, and the companies offering such utility services are rightly seen as recession-proof. Thus, an investment in utilities is considered largely safe, as slow, yet steady growth is almost guaranteed for all utilities’ stocks. Moreover, this predictability also means that utility companies also often pay out very strong dividend yields.
- Ample room for investment diversification:
Perhaps the strongest advantage of the services sector, that sets it apart from other sectors you might be considering to invest in, is the fact that it is huge and it contains companies of all sizes, operating in various different subsectors. This means that by investing in service stocks alone, you can comfortably attain a level of diversification of your investment portfolio that is more than adequate to offer you the level of investment protection you are after. The maintenance of a heavily diversified portfolio is a very wise and effective investment strategy and investing in the services sector fully accommodates this, as the sector contains both cyclical and non-cyclical stocks. In fact, the diversification opportunities present in the service stocks sectors are unmatched and unrivaled by other sectors, and in this sense, they can be seen as unique.
- Offering the Feel-Good Factor:
Another merit to be found in one specific subgroup of the services sector is that investors may invest not merely in pursuit of profit but also in getting the satisfaction that their investment is a truly good deed. This feel-good factor is very present when investing in the medical services subsector, as companies in this specific field are offering services that aim to fight disease and make people feel and be better. An investment into medical services is supporting the work of modern-day heroes, the doctors, and nurses who care for and provide comfort and cure to patients.
Things we didn't like in Services stocks investment
Despite the many advantages to be had when investing in service stocks, such an investment also comes with certain downsides and drawbacks, the chief amongst them being:
- Services are evolving fast:
A potential source of danger when investing in service stocks lies in the fact that services are ever-changing and evolving. A characteristic example is cable companies, which once were considered a highly lucrative service gaining massive numbers of subscribers. The onset of streaming services such as Netflix however, now means that cable services are rapidly losing relevance and traction, not least because streaming services are much cheaper. What is important to keep in mind when investing in services is that these may change rapidly and it is thus important not only to look at the present demand for a particular service but also be able to quickly and correctly diagnose consumer trends to be able to avoid big losses to your investment portfolio.
- The sheer size makes navigation difficult:
Because the services sector is the biggest sector of economic activity by far and the companies it encompasses are so varied and divergent, operating in several different subsectors with markedly different characteristics, attempting to navigate through the plethora of services stocks is a very hard task. In fact, especially in the eyes of inexperienced, novice investors, trying to shift through service stocks to identify the most suitable for them may seem very daunting and even impossible. Unfortunately, picking the right service stocks to add to your investment portfolio requires quite a bit of time and effort to effectively research different subsectors and different companies.
- Education on the Entire Sector Is Difficult:
Following from the previous point, the massive size of the entire services sector and its several subsectors which contain companies operating in a great number of different industries means that you cannot gain the necessary education in order to adequately understand how the entire sector works in great detail.
However, if you lack the detailed understanding and insight to be able to know what makes each stock tick, then you will not be in a position to properly time your entry and exit into each investment, thus enhancing the risks for losses. Instead of trying to grasp the services sector in its entirety, therefore, it is best if you focus only on those subsectors and niches you can study and learn well.
Where Can You Buy Services stocks
There are several online sites and platforms where people from across the globe can buy Services at good exchange rates and with low or no transaction fees.
To aid your quest we have comprised a list of some of the most popular Stock Trading platforms to buy Services sector's shares from and your strongly advised to consult this list before making your first purchase of or investment in Services industry.
Features to Look in Services stocks
Key Factors to keep in mind when investing in Lesser-Known Services Stocks
To know when you should invest in service stocks, you must first decide the exact type of service stock you are investing in. For example, any time is good for an investment in utilities stocks, provided your aim is to invest in a relatively safe field that offers a slow, yet steady growth and an extra income though dividends.
The important distinction you must make between services stocks, to be able to time your investment correctly, is whether a service stock you are considering is cyclical or non-cyclical.
Examples of cyclical service stocks are the stocks of companies in the travel, entertainment, and consumer discretionary services, and investing in these types of stocks should be undertaken during periods of positive economic conditions, as their prices tend to go up when consumers have more income to spend. A positive economic present and good prospects for the future are your cues for investing in cyclical services stocks.
On the other hand, if you fancy an investment in non-cyclical service stocks, i.e. the stocks of consumer staple services, such as medical services or utilities, then the right time to make such an investment would be during economic declines and periods of economic hardships, as the demand for such services is often unaffected or even increases under such conditions.
Future Outlook for Services stocks
Is now the right time to invest in Services stocks?
The answer is definitely not no, but a little short than a resounding yes. The industry’s outlook is promising and its future appears bright, however, investors should not be expecting a linear growth pattern, nor anticipate that all Services stocks will fare equally well. To maximize the chances for success of your Services sector stocks investment make sure you make smart and wise decisions on which energy companies you will choose to invest in.
Risks of Investing in Services stocks
Tips on How to Invest in Services stocks and Make a Profit
There is no guarantee that you will make a profit when you invest in Services. However, to give yourself the best chance possible we have hand-picked the three most valuable such strategies, which you can find below:
- Tip 1: Set your own specific Financial Goals
- Tip 2: Dollar-Cost Average Your Services Investments
- Tip 3: Diversify Your Services Investment
Overall Conclusion – Final Thoughts
The service sector is massive, divergent, and exciting, and investing in services stock holds great prospects and potential for amazing gains and profits. The same massive size, however, is quite intimidating and makes effective understanding and navigation very difficult and painstaking, especially for novice investors. This being said, if you are willing to undertake the necessary research and carefully perform your due diligence when selecting companies in the services sector to invest in, the services sector is ideal as it offers ample opportunities for diversifying your investment portfolio and several options which are bound to meet the needs and cater to the trading style of every type of investor.
In this guide, the aim wasn’t only to answer simple questions like “how to buy stocks of the Services sector?” or “where to buy Services stocks?”. Instead, the goal was to equip you with the relevant knowledge and insight to be able to see and understand the bigger picture as well as make your Services stocks investment journey as successful and as profitable as possible!