A region is a geographical location. In order to ensure diversification, the fund manager will research the investment performance potential within various regions throughout the world. The regional allocation determines the geographical split within your portfolio. This global approach ensures that your investment is not concentrated on one particular region and helps to reduce the impacts of a downturn in a specific region’s economy.
A sector is an area of the market, society, industry, or economy that share similar characteristics. Securities are often grouped into different sectors depending upon the company’s business such as utilities, technology, healthcare etc. Much like allocating investment to certain regions, the fund manager will decide which sectors are the most appropriate to invest in and how much to allocate to each. Again diversification is a key factor in sector selection, ensuring that your investment is not over exposed to one particular area. An appropriate spread across sectors will also reduce the impacts of a negative performance in any specific sector.