November 24, 2021
S&P 500 Index Today - Price Chart
52 Week Range 52 Weeks High 52 Weeks Low $4,743.83 $3,594.39
What is the S&P 500?
The S&P 500 (Standard & Poor's) is the biggest index in the United States that indicates the performance of the top 500 large-cap stocks listed on NYSE or NASDAQ. S&P 500 holds $35.38 trillion market capitalization, which is more than 70% of the total ($49.10 trillion) total U.S. stock market capitalization comprising 11 different leading sectors. (Update: 01/04/2021)
All the 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 the 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 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 shares 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 the index.
Companies with a large market cap in the index get more weightage 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 has more influence on the index.
Also, stock weight is valuable data for investors because they can understand the importance of each stock and divide their portfolios based on stock weight to get good returns with low risk. Check this document for in-depth details about S&P Indices Methodology
Top Companies & Sectors in S&P 500 Index
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 the index is 505 (with a different class of shares) but the surprising thing is that 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 Index Constituents by weight -
As of Jan 2021, the Index sector weightage -
S&P 500 vs. Other Index
The Standard & Poors index represents the top 500 large-cap stocks based on weighed market capitalization but the Dow Jones Industrial Average (DJIA) also known as the Dow 30 Stocks is focused on thirty blue chip publicly traded stocks which are 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 selected by committee only.
The S&P has all types of sector stock which is not considered in Nasdaq Index because Nasdaq-100 works on the updated market cap method which includes 100 non-financial large-cap companies which are listed on the Nasdaq Stock Exchange.
Check - How Vix Effect The S&P 500
S&P 500 Important Historical Events
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
S&P 500 Performance
The index has generated around 11%-12% annual average returns in the last 93 years (1926-2019). So If you had invested $100 in the S&P 500 Index at the beginning of 1970, it would have grown to nearly $15400 by the end of 2019 (with dividend)
Check the Dividend Stock -->
How to Invest In S&P 500
If you want to start investing, then the S&P 500 is a good option as you can focus on large-cap & blue-chip stock to get a stable return. But as we know, we can't invest directly in an index, and to invest in S&P 500, you have to buy ETFs (Exchange Traded Funds) or Index funds. Check the below post to know about the best S&P 500 ETFs or Index Funds:
You can follow below process to buy S&P 500 ETFs:
Open a Brokerage Account
To start investing, first, you need to open a brokerage account which takes only 1-2 business days. If you don't know what is the best brokerage account for you, we recommend you to go with TD Ameritrade or Fidelity.
Select the Best Option
Before investing, you have to choose the best ETFs or Index with a low expense ratio that is convenient for you.
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 is 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 consist of 500 companies but actual total stocks is 505 with different class of stocks.
S&P 500 is a safe way to invest for long-term stable returns because by investing in index, you invest in stocks that lead the world's biggest economy.
Historically, it has given 11-12% return
|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 was 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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Abhishek has experience of 4 years in Finance Content writing. He writes on investing in Stock Market and Cryptocurrencies.
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