S&P 500

What is it? An index of 500 large capitalization domestic stocks that represents the overall stock market. Also known as the Standard & Poor?s 500, the index is market-value weighted, which means that stock prices are multiplied by the number of shares outstanding. A Standard & Poor?s Corp. committee chooses stocks from leading companies in leading industries to reflect the U.S. stock market. The S&P 500 is the most widely followed benchmark for portfolio performance. When investors refer to their portfolio or mutual fund beating the S&P, they mean that their investments are earning a better return than the S&P 500 index. The U.S. component of the S&P Global Index, the S&P 500 is divided into four industry groups: Industrials, Financial, Transportation, and Utilities. Standard & Poor?s tracks all four industry groups in separate indexes. By far the largest group is the Industrials with 376 companies in the S&P 500. Next is Financials with 72 banks, brokerages, and other financial services companies. Utilities has 41 companies, and Transportation has 11 airlines and other companies. Standard & Poor?s does not mandate the number of companies in each group, but all together they must add up to 500.

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