Standard & Poor's 500 Index

Standard & Poor's 500 Index (S&P 500). The benchmark Standard & Poor's 500 Index, widely referred to as the S&P 500, tracks the performance of 500 widely held large-cap US stocks in the industrial, transportation, utility, and financial sectors.

In calculating the changing value of this capitalization-weighted index, also called a market value index, stocks with the greatest number of floating shares trading at the highest share prices are weighted more heavily than stocks with lower market value.

This can mean that a relatively few stocks have a major impact on the movement of the index at any point in time. The stocks included in the index, their relative weightings, and the number of stocks from each of the sectors vary from time to time, at S&P's discretion.

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Standard & Poor's 500 Index (S&P 500)

What Does Standard & Poor's 500 Index (S&P 500) Mean?

An index of 500 stocks that are chosen on the basis of market size, liquidity, and industry grouping, among other factors. The S&P 500 Index is designed to act as a barometer for the overall U.S. stock market; it reflects 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 in the index is proportionate to its market value.

Investopedia explains Standard & Poor's 500 Index (S&P 500)

The S&P 500 Index 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 proxy for the U.S. stock market. Other popular Standard & Poor's indexes include the S&P 600, an index of small-cap companies with market capitalization between $300 million and $2 billion, and the S&P 400, an index of mid-cap companies with market capitalization of $2 billion to $10 billion. A number of mutual funds and exchange-traded funds that are sold to investors are based on the S&P 500. This is helpful because it would be difficult and cost-prohibitive for average investors to buy all the companies in the index for their own portfolios.

Related Terms:
• Benchmark
• Dow Jones Industrial Average—DJIA
• Index Fund
• Large Cap—Big Cap
• Weighted Average