Global Industry Classification Standard

What I have graphically mapped out below is probably a useful and efficient investment tool, especially for investors who are interested in diversification across industries.

Diversification mixes a wide variety of investments within a portfolio. A well-diversified portfolio consists a mix of distinct asset types, investment vehicles and even across industries to limit exposure to any single asset or risk.

In 1999, MSCI and S&P Dow Jones Indices developed the Global Industry Classification Standard (GICS) to capture the breadth, depth and evolution of industry sectors.

GICS is a four-tiered, hierarchical industry classification system.

Companies are classified quantitatively and qualitatively and assigned a single GICS classification at the Sub-Industry level according to its principal business activity. Revenues and market perception are key factors in determining a firm’s principal business activity.

I stopped at the Industries-level as it suffice for the average investors. Going too in depth will probably be too micro and not very useful for investment assessment.

Do you diversify across industries too?


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