Investing in industrial stocks

A major sector that relies heavily on the economy and contains some of the world’s largest companies.

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Companies like General Electric and American Airlines are part of the industrial sector. But these stocks are linked to politics and the economy, so they can be volatile. Weigh the benefits and drawbacks of investing in industrial stocks to find out if they might be a good fit for your investment portfolio.

What are industrial stocks?

The industrial sector is one of 11 sectors of the stock market that include companies that produce goods for industrial and commercial use, such as in construction or manufacturing.

These businesses play a critical role in the economy by supporting other industries. They supply the industrial tools, machinery and equipment that are used to produce consumer goods and services.

What industries are included in this sector?

Industrial stocks cover many different industries. A few popular subsectors include:

  • Aerospace and defense. Companies that manufacture civil or military aircraft and defense products.
  • Construction and engineering. Those involved in the nonresidential building industry.
  • Electrical equipment. Producers of electrical components and equipment.
  • Machinery industry. These companies manufacture and sell industrial equipment and machinery to other companies, such as tractors for agricultural use.
  • Transportation infrastructure. This industry covers airport operations and companies that manage roads, tunnels, rail tracks and marine ports.

How to invest in the industrial sector in Australia

Invest in the industrial sector by purchasing individual stocks or exchange-traded funds (ETFs). By choosing your own stocks, you buy shares of a company and ultimately have more control over your investments. That comes with its fair share of risk. You can also choose the ETF route, which gives you a basket of industrial stocks to help minimize exposure.

A brief rundown of how to start investing in Australia:

  1. Find a brokerage. Explore different brokerage platforms in Australia and choose a firm that fits your financial needs.
  2. Apply for an account. You can open most brokerage accounts in Australia online. You’ll need to fund your account before you buy any stocks or ETFs.
  3. Pick your securities. Your platform should come with research tools to help you learn about the right stocks and ETFs for you.
  4. Place an order. When you’re ready, buy the security.
  5. Monitor your investments. Use your brokerage account to track your securities.

What stocks are in the industrial goods sector?

What ETFs track the industrial sector?

Several popular ETFs that track the industrial sector are:

  • Vanguard Global Infrastructure Index (VBLD)
  • VanEck Vectors FTSE Global Infrastructure (IFRA)

How is the industrial sector performing?

The graph below tracks the performance of the Industrial Select Sector SPDR ETF (XLI). Tracking ETF performance is one way to gauge how the sector as a whole is doing.

Why invest in the industrial sector?

Industrial stocks are susceptible to economic cycles. When the economy is doing well, the industrial sector thrives and may even outperform the market. For example, as the US recovered from the Great Recession in 2009, the S&P 500 Index returned 15.1% in 2010, compared to the S&P 500 industrial Index of 26.7%.

The industrial sector can also see a boost when the economy is just coming out of a recession. Economic growth and a rise in employment and profits can promote business confidence and outlook. That could mean new building projects and machinery purchases.

What unique risks does the industrial sector face?

The industrial sector is deeply connected to the global economy and the international political climate. Some risks that are unique to industrial stocks include:

  • Tariffs. In the midst of geopolitical unrest and trade wars, tariffs push the cost of goods up. Higher prices hurt consumers and can lead to fewer sales and cuts in production — slowing the sector down.
  • Low demand. During a weak economy, the need for industrial goods and services also declines. Less demand can directly impact industrial stocks’ profit and performance.
  • Global economy. Australian investors also need to watch the economies of key countries, like China. For example, about 6% to 10% of US industrials are tied to China’s economy, with some big names like General Motors (GM) and 3M (MMM). A slowdown abroad can affect a large portion of industrial stocks.

Compare stock trading platforms

Compare platforms to invest in stocks and ETFs in Australia.

Name Product Standard brokerage fee Inactivity fee Markets International
eToro (global stocks)
US$0
US$10 per month if there’s been no login for 12 months
Global shares, US shares, ETFs
Yes
Zero brokerage share trading on US, Hong Kong and European stocks with trades as low as $50.
Note: This broker offers CFDs which are volatile investment products and most clients lose money trading CFDs with this provider.
Join the world’s biggest social trading network when you trade stocks, commodities and currencies from the one account.
IG Share Trading
$8
$50 per quarter if you make fewer than three trades in that period
ASX shares, Global shares
Yes
$0 brokerage for US and global shares plus get an active trader discount of $5 commission on Australian shares.
Enjoy some of the lowest brokerage fees on the market when trading Australian shares, international shares, plus get access to 24-hour customer support.
Superhero share trading
$5
No
ASX shares, US shares
Yes
Australia’s lowest-cost broker for ASX shares and ETFs.
Pay zero brokerage on US stocks and all ETFs and just $5 (flat fee) to trade Australian shares from your mobile or desktop.
ThinkMarkets Share Trading
$8
No
ASX shares
No
Limited-time offer: Get 10 free ASX trades ($0 brokerage) when you open a share trading account with ThinkMarkets before 31 December 2021(T&Cs apply). $8 flat fee brokerage for CHESS Sponsored ASX stocks (HIN ownership), plus free live stock price data on an easy to use mobile app.
Bell Direct Share Trading
Finder AwardExclusive
Bell Direct Share Trading
$15
No
ASX shares, mFunds, ETFs
No
Finder Exclusive: Get 5 free stock trades and unlimited ETF trades until 31 Dec 2021, when you join Bell Direct. T&Cs apply.
Bell Direct offers a one-second placement guarantee on market-to-limit ASX orders or your trade is free, plus enjoy extensive free research reports from top financial experts.
SelfWealth (Basic account)
$9.5
No
ASX shares, US shares
Yes
Trade ASX and US shares for a flat fee of $9.50, regardless of the trade size.
New customers receive free access to Community Insights with SelfWealth Premium for the first 90 days. Follow other investors and benchmark your portfolio performance.
Saxo Capital Markets (Classic account)
$5
No
ASX shares, Global shares, Forex, CFDs, Margin trading, Options trading, ETFs
Yes
Access 19,000+ stocks on 40+ exchanges worldwide
Low fees for Australian and global share trading, no inactivity fees, low currency conversion fee and optimised for mobile.
CMC Markets Invest
$11
No
ASX shares, Global shares, mFunds, ETFs
Yes
$0 brokerage on global shares including US, UK and Japan markets.
Trade up to 9,000 products, including shares, ETFs and managed funds, plus access up to 15 major global and Australian stock exchanges.
HSBC Online Share Trading
$19.95
No
ASX shares, mFunds, ETFs, Bonds
No
Limited time offer: Get up to $100 in brokerage rebates on your first 5 trades when you sign up to a HSBC Online Share Trading account (T&Cs apply). Make trades online with brokerage fees starting from just $19.95 with an HSBC Online Share Trading account. Plus gain access to complimentary expert research, trading ideas and tools.
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Compare up to 4 providers

Important: Share trading can be financially risky and the value of your investment can go down as well as up. Standard brokerage is the cost to purchase $1,000 or less of equities without any qualifications or special eligibility. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.

Bottom line

The industrial sector could be a good option if you’ve got a pulse on global politics and have a strong understanding of the economic cycle, but there are unique risks to consider. When you’re ready to start investing, be sure to find the right online brokerage platform for your financial goals.

Frequently asked questions

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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