For those that have followed the Charles Schwab sector views, they will know that we strongly advocate maintaining a diversified portfolio that's consistent with each individual's risk tolerances.

Lately, however, we've received multiple questions about how sectors play into the overall investment picture for investors. There are two major ways - the first applies to all investors, while the second may or may not apply to you.

First, most investors will have at least a portion of their assets allocated to stocks. We believe only those assets that you don’t need for at least three years should be allocated to stocks in order to give the inherent volatility a chance to smooth out. However, it's really not enough to just say those assets should be in stocks.

There are a variety of segments of the market that can behave in very different ways. We divide the US stock market up based on general areas of the economy into 10 different sectors. It’s important for investors of all types to at least have a general idea of how their stock assets are allocated among the 10 sectors. Mirroring an index such as the S&P 500 on a sector basis is a good place to start to ensure exposure to all areas of the economy, which should help to smooth out some of the returns that would come from a more-concentrated portfolio.

Second, for investors who may wish to adjust their asset allocation to try to take advantage of what they predict may happen during the next few months, there’s the tactical approach to sector investing. This is where our outlooks come into play. Investors may want to look at the sectors that we’ve rated at outperform and move a small percentage of stock assets from an underperforming sector. A caveat here, these are relatively small, tactical moves—typically between 1 per cent and 4 per cent. This allows investors a chance to boost returns a bit, while still protecting against the dangers of a concentrated portfolio.

Having said that, we're currently rating both the information technology and health-care sectors sectors at outperform. Companies in these sectors generally feature cash-heavy balance sheets, which allow them to start paying dividends or raise the dividends they're already paying. Also, cash on hand means share repurchases and merger-and-acquisition activity can be increased, while also providing the opportunity to invest in growth initiatives. And we note other reasons for optimism as well - see the more-detailed write-ups below.

To offset our outperform ratings, we're rating the consumer discretionary and financials sectors at underperform. In addition to individual sector characteristics that drive our outlook, both groups are heavily exposed to the economic environment. And although the economy continues to grow, consumers and businesses remain highly cautious, which we believe could hurt both groups in the coming months.

We also continue to hold marketperform ratings on consumer staples, energy, industrials, materials, telecom and utilities.

Kully Samra is UK branch director at Charles Schwab