Choosing a company

Sector classification

An important consideration when investing is to look at the investment objectives of the company and what and where it is invested in.

There are a wide range of investment companies with exposure to different industries and regions of the world. Their objectives will also vary.

Investment companies are grouped into sectors by the AIC. The classification of each is based on a combination of regional and/or industrial focus of the portfolio combined with the company's investment objectives.

The sector classification system provides a useful way of grouping companies to allow for comparison. But it is important to remember that any grouping of companies will have its flaws as no two companies are ever the same.

The AIC sector classification system is overseen by the AIC Statistics Committee which is made up of AIC members and other industry related individuals.

Different regions of the world and economic sectors have varying levels of risk. Some areas of the world have higher levels of instability which could be due to worse economic outlooks or they may simply be more exposed to the vagaries of general perceptions and less understood. Some economic sectors are unpredictable and can be affected by world events such as weather patterns, wars or discoveries, or they may simply be more cutting edge and therefore less predictable.

The characteristics of each sector is a good place to start, but it's worth remembering that each company is different and that, when investing in the stock market, nothing is certain.

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