The AIC classifies investment companies into different sectors to help you find and compare them.
Why is sector classification important?
When you’re choosing an investment company, the range of choices can be baffling. It helps if you narrow them down to options that are most likely to suit you.
A good place to start is to decide which sectors offer the right characteristics. For example, if you are looking for income, you might want to consider sectors that specialise in delivering a high or growing income.
Alternatively, you might want a more generalist investment company that invests globally and which aims to deliver both income and capital growth.
If you already have a reasonably well balanced portfolio, you might be looking for something more specialist. Bear in mind that specialist investment companies can be more risky as they focus on one particular investment area.
As well as helping you to locate investment companies you’re interested in, sectors also make it easy to compare the performance and costs of investment companies with similar objectives. For example, you wouldn’t compare an investment company that invests in UK equities with another investment company that invests in Vietnamese property. Sectors allow you to compare apples with apples.
What do the AIC sectors mean?
The AIC classifies all investment companies into sectors. The classifications provide a way of grouping companies with common characteristics to make it easier to search and compare within particular sectors.
Sector classifications are usually based on one of the following:
- Regional focus. For example, Japan.
- Industry focus. For example, Biotechnology and Healthcare.
- The company's investment objective. For example, UK Equity Income.
There are rules to determine which investment companies go in which sectors, but no two companies are ever the same and there can be a lot of variation within a sector. It’s also important to remember there are no guarantees that investment companies will meet the objectives that apply to their sector.