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1Fix the driver behind crashes, sound loss and screen glitches2Clear out junk files and repair common Windows errors3Scan for outdated or missing drivers - takes under a minuteThe S&P 500 is an index maintained by S&P Dow Jones Indices that measures the performance of a representative group of large-cap U.S. equities. Investors and financial news use it as a market gauge and benchmark, but the index itself is not an investment: investors can buy mutual funds or ETFs that seek to track it.
What is the S&P 500?
A market index measures a basket of securities intended to represent part of a market or economy. The U.S. Securities and Exchange Commission (SEC) uses the S&P 500 as an example of an index that funds may seek to track.
S&P Dow Jones Indices describes the S&P 500 as including 500 leading companies and covering approximately 80% of available market capitalization. That figure is approximate and can change. The index is a major reference for large-cap U.S. equities, not a complete list of every publicly traded U.S. company or a measure of the entire economy.
What is the S&P 500 used for?
- As a market gauge: It offers a common way to describe the performance of large-cap U.S. equities. S&P Dow Jones Indices says it has served as an economic indicator in The Conference Board Leading Economic Index since 1968.
- As a benchmark: Investors can compare an investment’s results with the index when it represents a similar market and strategy. A benchmark that does not match the investment may make the comparison misleading.
- As an index for funds to track: Mutual funds and ETFs may seek to follow the index. The fund—not the index—is the investment product, and it has its own costs, structure, and tracking results.
How is the S&P 500 constructed?
The S&P 500 is maintained by an index committee; it is not simply a mechanical list of the 500 largest companies. S&P Dow Jones Indices says it identifies important industries in the U.S. equity market, approximates their relative market-capitalization weights, and selects a representative sample of stocks within each industry. Selection and index rules can change, so membership should not be treated as permanent.
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The index is capitalization-weighted: companies with larger market values have greater influence on its movements. This means the index’s return is not necessarily the return of a typical or average constituent.
How is it different from the Dow?
| Feature | S&P 500 | Dow Jones Industrial Average |
|---|---|---|
| Coverage | A representative group of 500 leading large-cap U.S. companies | A narrower index of 30 companies |
| Weighting | Capitalization-weighted | Price-weighted |
| What to remember | Larger market-value companies generally have more influence | Higher-priced stocks have more influence |
As S&P Dow Jones Indices explains, the two indexes use different selection and weighting approaches. Neither one describes every stock or every investor’s portfolio.
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Can I invest in the S&P 500?
You cannot buy the index itself. You can buy shares of a mutual fund or ETF that seeks to track it. Before investing, check the fund’s costs, structure, tracking results, and risks; its return may differ from the index’s return.
Return figures also depend on the convention used. A price-return index reflects price changes, while a total-return index reflects reinvested dividends. When comparing a fund with an index, make sure the figures use comparable return conventions.
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- Identify a mutual fund or ETF that seeks to track the S&P 500.
- Review its fees, structure, and approach to tracking the index.
- Compare performance using the same return convention, including whether dividends are reflected.
- Consider whether U.S. large-cap stocks are an appropriate fit for your goals and risk tolerance.
Why is the S&P 500 important—and what does it leave out?
The index gives investors, fund managers, and readers a widely used reference for large-cap U.S. equity performance. Its role as a benchmark and as an index tracked by funds makes it useful for discussing markets and assessing results against a relevant standard.
It does not represent every company, market segment, geography, or asset class, and it does not show the performance of an individual investor’s portfolio. Past index performance does not guarantee future results. Use it as a market measure and choose a benchmark that fits the investment being assessed.
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FAQ
What does the S&P 500 measure?
It measures the performance of a representative basket of large-cap U.S. equities. S&P Dow Jones Indices says it includes 500 leading companies and covers approximately 80% of available market capitalization; that coverage estimate can change.
Is the S&P 500 an investment?
No. It is an index, not a security or fund. Investors can buy shares in mutual funds or ETFs that seek to track it.
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Why do investors compare funds with the S&P 500?
It provides a common reference for large-cap U.S. equity performance. It is most useful when the fund’s investment market and strategy are similar to those represented by the index.
How is the S&P 500 different from the Dow?
The S&P 500 covers a representative group of 500 leading large-cap U.S. companies and is capitalization-weighted. The Dow covers 30 companies and is price-weighted, so the indexes can respond differently to the same market moves.
Does the S&P 500 include dividends?
It depends on the return measure being quoted. Price return reflects price changes; total return also reflects reinvested dividends. Check which measure a fund or comparison uses.
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