Friday, April 22, 2005

S&P 500 - Standard and Poor's 500 Index

S&P 500


An index consisting of 500 stocks chosen for market size, liquidity and industry group representation, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities, and it is meant to reflect the risk/return characteristics of the large-cap universe. Companies included in the index are selected by the S&P Index Committee, which is a team of analysts and economists at Standard and Poor's. The S&P 500 is a market-value weighted index, which means each stock's weight in the index is proportionate to its market value.

The S&P 500 is one of the most commonly used benchmarks for the overall U.S. stock market. The Dow Jones Industrial Average (DJIA) was at one time the most renowned index for American stocks, but because the DJIA contains only 30 companies, most agree that the S&P 500 is a better representation of the U.S. market. In fact, to many it is the definition of the market. When you hear on the evening news that "the market was up today", the reporter is likely referring to a rise in the S&P 500. Technically, it's nearly impossible to buy the index - you'd have to buy 500 different stocks. However, it's extremely easy to financial products based on the index, such as index funds and ETFs.


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