How Are Stock Market Sectors and Industries Classified?

There are many different classification systems that analysts, journalists, investors, and other market participants use to navigate, aggregate, and benchmark companies.

For instance, an investor interested in comparing a company’s price-earnings ratio to its industry peers require a way to quickly find the most similar companies. Mutual funds and exchange-traded funds (ETFs) tracking a specific industry similarly require a list of companies to build a portfolio.

Use our ETF Screener to find the right ETFs for your portfolio.

Classification systems provide a standardized way to accomplish these goals and countless others. Since there are many different ways to classify companies, there are several different classification standards that have been developed over the years.

Let’s take a look how classification systems are developed and some of the most popular ones in use today.