Industries vs. Sectors: What's the Difference?

Editor's note: Ask TheStreet is designed to answer questions about the market, terms, strategies and investment methods. Please email us to ask a question, but keep in mind that we cannot offer specific investment- or stock-related advice.

---

I've read a lot about the importance of sector analysis and industry analysis. Just when I think I have a grasp on which is which, I end up back at square one. Can you let me in on what distinguishes the two, an industry and a sector? -- M.S.

In the investing world, the grouping of stocks into industries and sectors is one of the most popular ways of categorizing them. The idea is this: It's a lot easier to compare the performance of two companies in the same field, which perform similar business functions, than to compare the performance of two unrelated companies. These fields -- which are known to investors as industries or sectors -- are essentially just classifications that can help us isolate stocks that are of specific interest. ...