The basic materials sector is comprised of companies that produce raw materials, such as steel, aluminum, and crude oil. These companies are the backbones of the global economy: without them, we wouldn’t have the basic ingredients to manufacture essential products, such as cars, buildings, houses, clothing, rechargeable batteries, and consumer electronics.
Because so much depends on this crucial market sector, materials companies are often large, thriving businesses that generate massive profits, both for themselves and the investors who own shares of their stock. That said, the materials sector is highly cyclical: when the economy is thriving, these companies might perform well; but when the economy falters, they’re often the first to suffer.
Investors who want to profit from materials stocks have a lot of options. Below, we’ll break down the materials sector and help you understand the risks and rewards of investing in it.
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