Standard & Poor's 500 Index - S&P 500

AAA

DEFINITION of 'Standard & Poor's 500 Index - S&P 500'

An index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe.

Companies included in the index are selected by the S&P Index Committee, a team of analysts and economists at Standard & Poor's. The S&P 500 is a market value weighted index - each stock's weight is proportionate to its market value.

INVESTOPEDIA EXPLAINS 'Standard & Poor's 500 Index - S&P 500'

The S&P 500 is one of the most commonly used benchmarks for the overall U.S. stock market. The Dow Jones Industrial Average (DJIA) was at one time the most renowned index for U.S. stocks, but because the DJIA contains only 30 companies, most people agree that the S&P 500 is a better representation of the U.S. market. In fact, many consider it to be the definition of the market.

Other popular Standard & Poor's indexes include the S&P 600, an index of small cap companies with market capitalizations between $300 million and $2 billion, and the S&P 400, an index of mid cap companies with market capitalizations of $2 billion to $10 billion.

A number of financial products based on the S&P 500 are available to investors. These include index funds and exchange-traded funds. However, it would be difficult for individual investors to buy the index, as this would entail buying 500 different stocks.

VIDEO

Loading the player...
RELATED TERMS
  1. S&P/TSX Composite Index

    The Canadian equivalent to the S&P 500 market index in the ...
  2. S&P MidCap 400 Index

    This Standard & Poor's index serves as a barometer for the ...
  3. Quadruple Witching

    The expiration date of various stock index futures, stock index ...
  4. Dow Jones Industrial Average - ...

    The Dow Jones Industrial Average is a price-weighted average ...
  5. Standard & Poor's - S&P

    The world's leading index provider and the foremost source of ...
  6. Dow Divisor

    A numerical value computed by Dow Jones Indexes that is used ...
RELATED FAQS
  1. How does beta measure a stock's market risk?

    Beta is a statistical measure of the volatility of a stock versus the overall market. It's generally used as both a measure ... Read Full Answer >>
  2. What is the average annual return for the S&P 500?

    According to historical records, the average annual return for the S&P 500 since its inception in 1928 through 2014 is ... Read Full Answer >>
  3. How can stock dividends provide protection against inflation?

    Stock dividends protect against inflation by providing tangible returns that supplement capital returns from rising stock ... Read Full Answer >>
  4. Why should I be looking at small cap stocks as a potential investment?

    Investors should look at small-capitalization stocks for upside growth potential and portfolio diversification. Despite these ... Read Full Answer >>
  5. What are the pros and cons of using the S&P 500 as a benchmark?

    The Standard & Poor's 500 Index is the most commonly used benchmark for determining the state of the overall economy. ... Read Full Answer >>
  6. What is the history of the S&P 500?

    The S&P 500 was introduced by Standard & Poor's in 1957 as a market index to track the value of 500 large corporations ... Read Full Answer >>
  7. Does the S&P 500 index include dividends?

    The S&P 500 index includes dividends. As of March 2015, the dividend yield for the S&P 500 was 1.91%. This is below ... Read Full Answer >>
  8. What is the difference between the S&P 500 and the Fortune 500?

    The Fortune 500 and the S&P 500 are different measures of companies in the United States, and they are compiled by two ... Read Full Answer >>
  9. What are the most common market indicators to follow the U.S stock market and economy?

    The key indicators for U.S. stocks are the Dow Jones Industrial Average (DJIA), the S&P 500 Index, and the Nasdaq Composite ... Read Full Answer >>
  10. What part of the economic cycle is best for investing in the metals and mining sector?

    Like the securities of most sectors, metals and mining stocks tend to perform best during times of economic expansion and ... Read Full Answer >>
  11. What are the most common ETFs that track the financial services sector?

    The Standard & Poor's Depositary Receipt (SPDR) Financial Select Sector Fund (XLF) has net assets of $17.73 billion and ... Read Full Answer >>
  12. Are all multinational corporations also large cap companies?

    Not all multinational corporations are large-cap companies. Large-cap companies have a market capitalization of $5 billion ... Read Full Answer >>
  13. What indicators help define a bull market?

    The primary indicators that help define a bull market are moving averages, advances/declines, volume, identified support ... Read Full Answer >>
  14. How do traders identify key signals from the autoregressive moving average?

    An autoregressive moving average, or ARMA, is used in the study of time series plotting. Models built on ARMA rely on linear ... Read Full Answer >>
  15. Is the Dow Jones a stock exchange?

    The Dow Jones Industrial Average is not a stock exchange, although it tracks stocks that are traded on the Nasdaq and the ... Read Full Answer >>
  16. How can I buy an S&P 500 fund?

    In 1976, Vanguard introduced individual investors to the first mutual fund designed to mimic the S&P 500 Index. Today ... Read Full Answer >>
  17. Where can I find the P/E ratios for the Dow and S&P 500?

    When it comes to valuing stocks, the price-to-earnings (P/E) ratio is one of the oldest and most frequently used metrics. ... Read Full Answer >>
  18. How is the value of the S&P 500 calculated?

    The S&P 500 is a U.S.market index that gives investors an idea of the overall movement in the U.S.equity market. The ... Read Full Answer >>
  19. What is the difference between iShares, VIPERs and Spiders?

    iShares, VIPERs and spiders each represent different exchange-traded fund (ETF) families. In other words, an individual company ... Read Full Answer >>
Related Articles
  1. Investing Basics

    An Introduction To Stock Market Indexes

    Investopedia explains the five most talked about indexes and what makes them all different.
  2. Markets

    Standard And Poor's 500 Index

    Learn about this index of index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors.
  3. Mutual Funds & ETFs

    S&P 500 ETFs: Market Weight Vs. Equal Weight

    Both indexes include the same stocks, but their weightings give them very different properties.
  4. Mutual Funds & ETFs

    Benchmark Your Returns With Indexes

    If your portfolio is always falling short, you may not be making an apples-to-apples comparison.
  5. Personal Finance

    How Stock Market Indexes Changed Investing

    Find out how the first market averages were calculated and what they mean for investors today.
  6. Economics

    The ABCs Of Stock Indexes

    Indexes can track market trends, but they're not always reliable. Can you trust them?
  7. Investing Basics

    What's the Primary Market?

    The primary markets are where investors can get first crack at a new security issuance.
  8. Investing Basics

    What is the Coupon?

    In the financial world, “coupon” represents the interest rate on a bond.
  9. Investing Basics

    Explaining the Coupon Rate

    Coupon rate is the stated interest rate on a fixed income security.
  10. Investing Basics

    What is Cyclical Stock?

    A cyclical stock is an equity security whose price is affected by ups and downs in the overall economy.

You May Also Like

Hot Definitions
  1. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  2. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  3. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  4. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  5. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center