Loading the player...

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

The Standard & Poor's 500 Index - S&P 500 is a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies by market value. The S&P 500 is a market value or market-capitalization-weighted index and one of the most common benchmarks for the broader U.S. equity markets. Other common U.S. stock market benchmarks include the Dow Jones Industrial Average or Dow 30 and the Russell 2000 Index, which represents the small-cap index.

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

The S&P 500 is one of the most widely quoted American indexes because it represents the largest publicly traded corporations in the U.S. The S&P 500 focuses on the U.S. market's large-cap sector and is also a float-weighted index, meaning company market capitalizations are adjusted by the number of shares available for public trading.

S&P 500 Versus Dow Jones Industrial Average

The S&P 500 is often the institutional investor's preferred index given its depth and breadth, while the Dow Jones Industrial Average has historically been associated with the retail investor's gauge of the U.S. stock market. Institutional investors perceive the S&P 500 as more representative of U.S. equity markets because it comprises more stocks across all sectors (500 versus the Dow's 30 Industrials).

Furthermore, the S&P 500 uses a market capitalization weighting method, giving a higher percentage allocation to companies with the largest market capitalizations, while the DJIA is a price-weighted index that gives companies with higher stock prices a higher index weighting. The market capitalization-weighting structure is more common than price-weighted method across U.S. indexes.

S&P Versus Russell Indexes

The S&P 500 is a member of a set of indexes created by the Standard & Poor's company. The Standard & Poor's set of indexes are like the Russell index family in that both are investable, market-capitalization-weighted (unless stated otherwise, like equal-weighted) indexes.

However, there are two large differences between the construction of the two families of indexes. One, Standard and Poor's chooses constituent companies via a committee, while Russell indexes use a formula to choose stocks to include. Second, there is no name overlap within S&P style indices (growth versus value), while Russell indexes will include the same company in both the "value" and "growth" style indexes.

Other S&P Indices

The S&P 500 is a member of the S&P Global 1200 family of indices. Other popular indices include the S&P MidCap 400, which represents the mid-cap range of companies and the S&P SmallCap 600, which represents small-cap companies. The S&P 500, S&P MidCap 400 and S&P SmallCap 600 combine to create a U.S. all-capitalization index known as the S&P Composite 1500.

RELATED TERMS
  1. S&P Phenomenon

    The S&P phenomenon occurs when a stock's price rises sharply ...
  2. Russell 3000 Index

    The Russell 3000 Index is a market-capitalization-weighted equity ...
  3. Dow Jones U.S. Total Market Index

    The Dow Jones U.S. Total Market Index is a market-capitalization-weighted ...
  4. Market Index

    A market index is a weighted average of a section of the stock ...
  5. Russell Midcap Index

    The Russell Midcap Index is a market capitalization weighted ...
  6. Index

    An index measures the performance of a basket of securities intended ...
Related Articles
  1. Investing

    S&P 1500 Index: A Revenue Case Study

    Learn what comprises the S&P 1500 and how analysts use revenue trends to benchmark against the performance of a portfolio or single stock investment.
  2. Insights

    The S&P 500: The Index You Need To Know

    Just how are companies added to and dropped from the S&P 500, and how is its value calculated? Curious? Read on.
  3. Investing

    S&P 500 ETFs: Market Weight Vs. Equal Weight (RSP, SPY)

    Both S&P 500 and S&P 500 EWI indexes include the same set of stocks, but different weighting strategies give them separate individual properties.
  4. Investing

    S&P 500 Vs. Russell 2000 ETF: Which Should You Get?

    We look at the differences of investing in a S&P 500 vs. the Russell 2000 exchange-traded fund, and when to choose the one over the other.
  5. Investing

    S&P Updates Market Cap Thresholds for Its Indexes

    Updating its requirements to reflect the long bull market, S&P Global (NYSE: SPGI) unit S&P Dow Jones Indices is raising the market capitalization requirements for stocks to be listed on three ...
  6. Investing

    Top ETFs And What They Track: A Tutorial

    This Investopedia tutorial provides an introduction to the leading exchange-traded funds by assets under management, broken down by market category.
  7. Investing

    DIA vs. IWL: Comparing ETFs with the Largest U.S. Companies

    Find out how the SPDR Dow Jones Industrial Average ETF compares with the iShares Russell Top 200 as mega-cap exchange-traded funds.
RELATED FAQS
  1. Is there an index for tracking mid-cap stocks?

    Learn the specifics about indexes available for tracking companies with market capitalizations in the medium-sized, small ... Read Answer >>
  2. What's the difference between the Dow Jones Industrial Average and the S&P 500?

    The DJIA is a price-weighted average of 30 stocks whereas the S&P 500 is a market value-weighted index of 500 stocks. Read Answer >>
  3. 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 >>
  4. What is the difference between the S&P 500 and the Fortune 500?

    Learn what the Fortune 500 and S&P 500 are, how the companies are chosen to be on the lists, and the main difference between ... Read Answer >>
Trading Center