Some of the best sectors for an investor seeking high annual returns to consider are health care, consumer cyclical and technology. Stock market sector data shows that these three sectors have been top performers over the past five years.

Investors seeking high annual returns focus on sectors that have traditionally attracted growth investors and that are also showing current upward momentum. Investors narrow their focus further to the most promising industries within a sector, and finally to the top performing companies within those industries that continue to offer high growth potential. One strategy for identifying the most promising sectors is to look first at longer-term performance, such as five-year returns, to identify consistent performers and then to examine recent one-year returns to identify which sectors appear to show current increasing momentum.

According to Morningstar ratings, as of 2015, the best-performing sectors over the past five years have been health care, showing roughly a 20% return, consumer cyclical, with approximately an 18% return, and technology, with returns just under 16%. These returns compare favorably with the overall market average as represented by the S&P 500 Index of 10% over the same time period. The health care and technology sectors have performed even better recently, with one-year returns of approximately 25%. In contrast, the consumer cyclical sector's one-year return is only 12%, which is still better than the overall market average, but lacking the apparent momentum of the health care and technology sectors.

The best-performing industries within the sectors of health care and technology over the past five years have been health care support services and computer services. This tends to support the idea that the stocks of services providers, rather than goods providers, have fared better in recent years.

The idea that service industries are showing the best high-growth potential currently is also supported by the recent performance of another sector for growth investors to consider. The financial services sector made an extremely strong recovery in 2014, averaging over a 100% return for the year. While it is unlikely that the sector will continue to advance at that pace, it is very possible that the sector's upward momentum will continue at least in the near term.

To identify specific companies to invest in, investors analyze profitability ratios such as return on equity (ROE) and examine the financial health of companies through leverage and solvency ratios to determine which firms offer the highest growth potential and best risk/reward opportunities.

However, investors also need to be aware that industries within the stock market tend to be cyclical. The best performing industries of one decade may decline in the next decade. This caution is particularly important in times of volatility and economic uncertainty, where market conditions often change rapidly.

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  2. Sector

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