Standard & Poor’s 500

The Standard & Poor’s 500 (S&P 500) tracks the 500 largest (measured by market value) publicly trade companies. The publishing firm Standard & Poor’s created this index. (I bet you could have guess that.) Because it contains 500 companies, the S&P 500 represents overall market performance better than the DJIA’s 30 companies. Money managers and financial advisors actually watch the S&P 500 stock index more closely than the DJIA. Most mutual funds especially like to measure their performance against the S&P 500 rather than against any other index. Mutual funds that concentrate on small-cap stocks usally prefer on index that has more small-cap stock in it, such as the Russell 2000.

The S&P 500 doesn’t attempt to cover the 500 “biggest” companies. Instead, it includes companies that are widely held and widely followed. The companies are also industry leaders in variety of industries, including energy, technology, healthcare, and finance. It’s a maket value weighted index.

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