There are many advantages between industry index funds and broad based index funds, but there are still many new investors who do not know what industry index funds are and how they are classified. Today, I will give you a simple answer.
We will contact different industries in our daily life, such as consumption, medical care, finance, real estate, etc. These are the industries we can contact in our life. What is the standard industry classification? Morgan Stanley and S&P launched the global industry classification standard in 2000. Divide all companies into 10 first level industries, and build industry indexes around these 10 industries. What are the 10 industries?
Each of these 10 industries is very important and indispensable in modern society. This classification method was later introduced by domestic companies, and most domestic industries were classified according to this standard.
In addition to the 10 main industries, there is another way to divide industries according to specific themes. A theme industry can be composed of several different industries, such as pension industry, environmental protection industry, military industry, health industry, etc. These industries are all based on a theme to find the corresponding companies, which may include upstream and downstream companies of the theme.
We should make it clear that not all industries are worth our investment, so what industries are worth our investment?
1. An excellent industry that is naturally easier to make money
2. Industries with obvious strong periodicity and profitability at the bottom of the cycle
