What is the SP500?

Answer:
No, it’s not a Nascar race. The SP500 stands for Standard & Poor’s 500 index

which is a leading benchmark for U.S. equity performance. The SP500 index consists of 500 of the most commonly held United States-based large-cap stocks. A few international stocks are listed. However, in the future only US companies will be added. The Standard & Poor’s Index committee which is composed of analysts and economists selects the leading stocks from leading industries based on liquidity, market size, and sector representation.

Nearly 70% of the U.S. equity market’s value is represented in the SP500. The index is market-value weighted which means that each stock’s weight in the SP500 is proportionate to its actual market value.

While the Dow Jones Industrial Average is considered one of the most used benchmarks for the US stock market, it only contains 30 companies. Many consider the SP500 a much better indicator of the health of the US market.

In addition to the SP500 which measures large-cap companies, Standard & Poor’s also measures small-cap companies through their SP600 index and mid-cap companies through their SP400 index.


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