What are the S&P 500?
They are, by some measure, the top 500 quoted companies in the United States. The S&P 500 take their name from the S&P 500 index of which they are constituents. The companies are chosen by economists at Standard's & Poor, the credit rating agency.
Where have you heard about the S&P 500?
Rather like the Fortune 500, the S&P 500 is an elite corporate club referred to frequently in business magazines and investment literature. Financial reports into the US economy might mention the level of the S&P 500, particularly when it hits a new record, like in January 2017 when it reached 2,300.
What you need to know about the S&P 500.
The index includes 500 leading companies and captures approximately 80% coverage of available market capitalisation with Apple, Microsoft and Exxon as the three largest companies. Like all major indices the S&P 500 uses the Global Industry Classification Standard (GICS) to split the companies into sectors such as energy, healthcare, financial, information technology and retail.
Its diverse constituency and weighting methodology set it apart from indices such as the Dow Jones Industrial Average or the Nasdaq. Many consider it the best representation of the US stock market and a bellwether for the US economy.
The index dates back to 1923 but was expanded to 500 companies in January 1957. If you look at a graph of how the index has performed over this time it will give you an insight into the highs and lows of the American economy, through periods of growth and recession.
It was developed and continues to be maintained by S&P Dow Jones Indices, a joint venture majority-owned by S&P Global.
The S&P 500 Top 50 is a related index that measures just the top 50 companies in the S&P 500.
The ticker for the index is SPX.