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

What is the 'Standard & Poor's 500 Index - S&P 500'

The Standard & Poor's 500 Index (S&P 500) is 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.

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BREAKING DOWN '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.

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RELATED FAQS
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    Learn about the advantages and disadvantages of using the S&P 500 as a benchmark for portfolio performance, and understand ... Read Answer >>
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    The major difference between these two indexes is that the Dow Jones Industrial Average (DJIA) includes a price-weighted ... Read Answer >>
  3. What is the average annual return for the S&P 500?

    See the historical performance of the S&P 500 Index, and examine a number of factors that affect an investor's actual return ... Read Answer >>
  4. How are S&P 500 index components weighted?

    Learn about how components of the S&P 500 are weighted, and how this calculation favors certain stocks in being more representative ... Read Answer >>
  5. How do indexes determine which stocks are removed or added to them?

    Stock indexes are formed based on the kinds of stocks or financial securities they want to track. For example, the Standard ... Read Answer >>
  6. Where can I find a list of all of the stocks in the S&P 500?

    The actual list of all 500 stocks in the S&P 500 is called the Constituent List. It can be found on the official Standard ... Read Answer >>
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