May 19, 2021
S&P 500 Index
52 Week Range 52 Weeks High 52 Weeks Low $4,249.74 $2,965.66
What is the S&P 500?
The S&P 500 (Standard & Poor's) is the biggest index in the United State that Indicates the performance of top 500 large cap stocks that are available for publically trade on the NYSE or NASDAQ. The indice holds $35.38 trillion market capitalization which is more than 70% of the total ($49.10 trillion) U.S. stock market cap, comprising 11 different leading sectors. (Update: 01/04/2021)
All the S&P 500 Companies are selected by the U.S. Index Committee based on many factors, like - Market Cap, Revenue, Liquidity, Sector, Shares in the Public, Performance, Location, and Annual Trade Value etc.
For that reason, the S&P 500 is the face of the entire American market which the investor use as a benchmark so that they can compare other investment instruments at a standard level.
How the S&P 500 Works?
The Standard & Poor's 500 work on weighted market capitalization method which means that a company with a high market cap has a high ranking in the index. The calculation of companies weightage is very simple, taking the each company's market cap and dividing it by the total market cap of the S&P 500 index.
[Note: In the S&P, Company's free float market cap is used to calculate the weight, which means only those shares are taken which are available for public trade, other share are not included.]
Company Market Cap = Current Market Price of Stock x Company's Outstanding
Total Market Cap of Index = Add The Market Cap of Each Company in The Index
For example: Apple has a market cap of $2.128 trillion (14 May 2021), while the total market cap of the S&P 500 is $37.57 trillion (estimated), so the weighting of Apple stock is 5.66 in index.
Companies with a large market cap in the index get a more impression compared to small market cap companies. As a fact, the technology sector in S&P 500 has more than 27% of weightage which means this industry are more effective than others on an index.
Also stock weight is a valuable data for investors because they can't directly invest in S&P 500, but in weightage method they can understand the importance of each stock and divide there portfolio based on stock weight to get same return of index.
Top Companies & Sectors
Being the largest index in the world and the United States, the S&P companies lead the economy as well as reflect the market behavior. The total number of stock in index is 505 (with different class of shares) but the surprising thing is that only the top 10 companies weight is more than 25% of the entire index.
As of 14 May 2021, this is the top ten S&P 500 companies by weightage -
As of Jan 2021, the S&P 500 sector weightage -
S&P 500 vs. Other Index
The S&P 500 index is represents the top 500 large cap stocks based on weighting market capitilization but the Dow Jones Industrial Average (DJIA) also known as the Dow 30 is focused on thirty blue chip publicly-traded stocks which is price-weighted.
The value of the Dow reflecting the sum of the share price of the 30 stocks adjusted by dividend or stock split and all companies ranking changes on their importance, whereas S&P consists of stocks by committee only.
The S&P has all type of sector stock which is not consider in Nasdaq Index because Nasdaq 100 is works on updated market cap method which includes 100 non-financial large cap companies which are listed on Nasdaq Stock Exchange. This new methodology uses different weights of the items involved in market capitalization and balance the index with all companies.
S&P 500 Important Events
Below you can understand the timelime & events of S&P 500 with closing price.
June 4, 1968
First time above 100
October 19, 1987
Falling 20.47% in a single day (Black Monday)
February 2, 1998
First close above 1,000
March 24, 2000
At the peak of the dot-com bubble
October 10, 2002
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October 11, 2007
The index achieved a new all-time intraday high
October 13, 2008
Best single-day 11.6% percentage gain since 1957
March 28, 2013
Recovering all its losses
August 26, 2014
For the first time
September 21, 2018
New high record
March 12, 2020
Largest fall during Covid-19 (bear market)
August 18, 2020
End of bear market
April 1, 2021
First time close above 4000
The S&P 500 Metrics
How to Invest In S&P 500
If you want to start investment then the S&P 500 is a good option, where you can focus on large-cap & blue-chip stock to get a stable return but as we know that we can't invest in an index directly. So here are the certain ways like Mutual Funds and ETFs that can help us to invest in all S&P stock within a single click.
Now the question is "How to buy s&p 500 index fund & mutual funds" for that you can follow these step by step process -
Open a Brokerage Account
To start investing, first you need a brokerage account which is takes only 1-2 business day. If you don't know what is the best brokerage account for you then we recommnend go with TD Ameritrade or Fidelity.
Select the Best Option
Before investing, you have to choose any one option from mutual funds and ETFs which is convenient for you, with many comparisons we know that ETF is good with low fees and easy process.
Pick Your Favorite Fund
Now you have to compare ETF funds in details like charges, return and performance so you can pick the good one. You can also start with Fidelity and Vanguard S&P 500.
Login at Your Trading App
Enter username and password to log in at the trading app after that you can add or deposit your suitable amount in your brokerage account and ready to buy.
Buy Funds and Units Will Be Credited
Finally, you can buy a fund in few clicks and after the unit credited to the account, you are an ETF fund owner.
Frequently Asked Questions
The S&P 500 is the Standard and Poor's 500 large cap companies index which is available for publicly traded. Its biggest & popular indices represent the U.S Stock Market.
The S&P 500 consits of 500 companies but actual total stocks is 505 with different classof stocks.
According to me, this is a safe way to invest for long term stable return goal because you invest in those stocks which are leading the world biggest economy.
|The average annual return of S&P 500 is 11% to 12% and the rest are given below -|
- Apple Inc.
- Microsoft Corp.
- Amazon.com Inc.
- Facebook Inc. A
- Alphabet Inc. A (GOOGL)
- Alphabet Inc. C (GOOG)
- Berkshire Hathaway
- JPMorgan Chase
- Johnson & Johnson
- Information technology: 27.60%
- Health care: 13.44%
- Consumer discretionary: 12.70%
The worst day is 19 Oct. 1987 (Black Monday) when the index fell 20.47% in a single day and the worst year is 2008 (Market Crash).
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About the Author
Hi! My name is Abhishek Vyas and I am the co-founder & senior editor of Finasko. I write about better investing and financial decision making to achieve financial freedom.
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