S&P 500

The S&P 500 (Standard & Poor's 500) is a stock market index that tracks the performance of 500 of the largest publicly traded companies in the United States.

It is considered one of the best representations of the overall U.S. stock market because it includes companies from a broad range of sectors, such as technology, healthcare, finance, consumer goods, and more.

The index is market-capitalization-weighted, meaning that each stock’s influence on the index depends on its market capitalization. Larger companies have a bigger impact on the performance of the index.

To calculate the index value, the total market capitalization of the companies in the index is summed and then divided by a divisor, which is periodically adjusted to maintain consistency.

It serves several purposes:

• Market benchmark: it is a widely-used benchmark to track U.S. stock market performance, allowing investors to measure their investment returns against the index;
• Economic indicator: it is often used to gauge the health of the U.S. economy, as it represents the majority of publicly traded companies;
• Investment tool: it is frequently used in investment funds and portfolios, with many aiming to outperform the S&P 500 over time;
• Passive investing: the index's popularity has led to index-tracking products like ETFs and index funds, enabling investors to invest in the index without picking individual stocks.