Financial FitnessGeneral Information

Why is the S&P 500 important?

By April 4, 2019 No Comments

What is the S&P 500?

When we refer to the S&P 500, the S&P 500 is a market value weighted index with each stock weighed in the index proportionate to its market value and it is the 500 stocks with the largest market capitalization.

Why is the S&P 500 important?

In other words, the 500 largest publicly traded companies based on the market cap.  The reason why that is quoted, is because it represents 500 companies.  The Dow Jones Industrial represents only 30 industrial companies.  According to BTN Research, as of December 31st, 2018, the overall U.S. Stock Market was worth $27.4 trillion.  What’s interesting is the S&P 500, just 500 companies, make up 81% of the entire stock market capitalization, which is equal to 22.1 trillion.

So that’s why the S&P 500 is often quoted because the index is very broad, and it covers 81% of value of the entire stock market.

 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and may not be invested into directly. 

Stock investing involves risk including the loss of principal. 

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.