Discretionary consumption values are one of the 10 main sectors of the stock market listed in the World Industry Classification (GICS). Standard & Poors is one of the developers of the GICS system and uses the classifications that divide the shares of the S&P 500 index into the market sectors. The discretionary consumption values constitute approximately 10% of the total market value of the S&P 500 shares.
Types of companies
Discretionary consumption values are companies that produce goods or services that the public can buy. Examples of products produced in this sector are cars, clothing and sports equipment. Discretionary services include restaurants, hotels and movies. The market sector that contrasts with discretionary consumption is the basic consumer goods sector. Basic consumer products are food, beverages, medications and personal care products.
Discretionary Consumer Companies
The five largest companies with a stock market value in the consumer discretionary sector are McDonald’s, Walt Disney, Ford Motor Company, Amazon.com and Comcast. These companies show the range of products and services provided by companies in the sector. The sector includes retailers such as Home Depot and Kohls, travel companies such as Priceline.com and Carnival Corp. and manufacturers such as Mattel and Harley-Davidson. Of the S&P 500 populations, 79 are in the consumer discretionary sector.
Fidelity Investments notes that the discretionary consumer sector is the stock market segment most affected by economic cycles. The growth of the US economy It is consumer-driven and discretionary actions provide the goods or services that consumers buy when they feel good about their finances and those that they do not buy when they are concerned about their situation. In the year 2010, since the US economy began to emerge from the recession, consumer discretionary shares had a one-year return of 27% until the end of November 2010. General S&P 500 returned 12% during that period of time.
How to invest in discretionary consumption values
SPDR Select Sector funds are quoted funds (ETFs) that hold the exact S&P 500 shares by sectors in the same proportion as the stock market index. The discretionary consumption of SPDR is quoted under the quotation symbol XLY. ETF shares, such as XLY, can be purchased through a securities brokerage account. For mutual fund investors, Fidelity offers a discretionary select consumer portfolio with no charge. This fund is actively managed and had a total return of 31.24% in 2010.