{"id":10780,"date":"2016-08-10T10:25:46","date_gmt":"2016-08-10T17:25:46","guid":{"rendered":"http:\/\/www.marketriders.com\/investing\/?p=10780"},"modified":"2016-12-20T13:41:48","modified_gmt":"2016-12-20T21:41:48","slug":"investor-facts-sp-500","status":"publish","type":"post","link":"https:\/\/www.marketriders.com\/investing\/investor-facts-sp-500\/","title":{"rendered":"Investor Facts: What Is The S&P 500?"},"content":{"rendered":"

The S&P 500 is a list\u00a0of 500 stocks recognized as representative of large-cap companies in the United States.<\/p>\n

Created by Standard & Poor\u2019s (S&P), the\u00a0S&P 500 Index of equities is weighted by market value and can change over time. It is meant to capture a large portion of the total value of the U.S. stock market, currently 80%, and thus\u00a0serve as an economic indicator in its own right.<\/p>\n

\"s&p<\/p>\n

Market weighting means that larger companies make up a larger percentage of the index. As a result, if the largest companies see an increase in their stock prices, that will push up the total index disproportionately. A down day for the biggest stocks will push down the overall index.<\/p>\n

In practice, the S&P 500 Index is\u00a0a gauge of daily market performance. Investment funds use it as a benchmark for their own performance<\/a> over time as well.<\/p>\n

\u201cBeating the market,\u201d in trader-speak, means exceeding the return of\u00a0the S&P 500 Index over a 12-month period or longer.<\/p>\n

Why follow the S&P 500?<\/h2>\n

The S&P 500 is the standard benchmark\u00a0for\u00a0the biggest traded stocks\u00a0in the U.S. economy. The market capitalization of these firms \u2014 the dollar value of shares held by investors \u2014 is at minimum $5.3 billion each and in many cases much more. At least half of a\u00a0company\u2019s stock has to be publicly traded to earn a spot\u00a0on the S&P 500 Index.<\/p>\n

Standard & Poor\u2019s has been tracking stocks with indexes since 1923, but the S&P 500 itself was not created until 1957<\/a>.<\/p>\n

The S&P 500 Index\u00a0is curated by a team of analysts and economists and is broadly recognized as the best way to answer the question, \u201cHow did the market do?\u201d today, this month or over many\u00a0years.<\/p>\n

Companies can be removed from the S&P 500 for a number of reasons, such as\u00a0bankruptcies and mergers, but often it\u2019s the case that small companies become larger and big companies shrink as the economy changes.<\/p>\n

For instance, telephone companies used to be the most\u00a0heavily weighted in the index. Today it\u2019s more often a technology company, an oil driller or a drug manufacturer.<\/p>\n

Investing in the S&P 500<\/h2>\n

Investors should keep an eye on the S&P 500 but not to the point that \u201cbeating the market\u201d is your primary goal. Instead, just owning an S&P 500 Index fund provides an annualized return very close to the market at an extremely low cost.<\/p>\n

I say \u201cclose\u201d because index funds are not free, although very nearly so. Moreover, investors today can construct entire\u00a0portfolios using only index funds and capture a variety of asset classes at a very low total cost.<\/p>\n

Diversification and periodic rebalancing<\/a>\u00a0in a portfolio helps to smooth returns and allows long-term savers to build account value steadily and with few surprises.<\/p>\n","protected":false},"excerpt":{"rendered":"

The S&P 500 is a list\u00a0of 500 stocks recognized as representative of large-cap companies in the United States. Created by Standard & Poor\u2019s (S&P), the\u00a0S&P 500 Index of equities is … Read more →<\/span><\/a><\/p>\n","protected":false},"author":8,"featured_media":10786,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_wp_rev_ctl_limit":""},"categories":[65],"tags":[62,43,55],"yoast_head":"\nInvestor Facts: What Is The S&P 500? | MarketRiders<\/title>\n<meta name=\"description\" content=\"In practice, the S&P 500 Index is a gauge of daily market performance. 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