Standard and Poor’s 500, otherwise referred as the S&P 500, is a stock market index composed of the 500 largest U.S. companies. A stock market index indicates how well a stock market is performing. These indices help financial analyst, bankers, even public servants in making determinations on the general economy. For instance, a state treasurer may use the stock index to determine a bull market or a bear market. Other stock market indices include, Dow Jones Industrial Average, NASDAQ, NYSE, Nikkei 225, FTSE 100 and more. However, the S&P is a specific index with particular criteria for measuring market performance.
History of the S&P 500 Stock Index
The first S&P 500 publishing was made during 1923 as a joint collaboration between the Standard Statistical Bureau and Poor’s Publishing. Originally, the S&P publications included only 233 companies across 26 different industries. In 1957, the S&P became a stock market index providing and tracking company earnings and stock prices for 500 corporations listed on the New York Stock Exchange (NYSE).
Largest U.S. Companies
Standard and Poor’s 500 stock market index do not differentiate corporations based on industry or business management. It is difficult to say what a good company is, let alone what companies should be trusted. Corporations are not listed on the index simply for size or popularity. A company qualifies for the S&P 500 index based on revenues and earnings, market capitalization and liquidity and considers other aspects on companies such as its float adjusted market cap. By this measure, The S&P 500 stock index is simply a list of the largest companies in the country. The listings includes companies such as Microsoft, Google, and McDonald’s.
Stock Market Performance
The S&P 500 stock index is a working model representing the general market. Generally, The U.S. economy performs well. In fact, the index records an average of approximately 12% growth over a given 20 year time period. For this reason, a mutual fund based on the S&P 500 stock market index is expected to provide investors’ a rate of return over 10% in the long term. An S&P 500 mutual fund offers investors’ liquidity and diversity in their portfolios at low costs, while ensuring an investor’s confidence her portfolio keeps pace with overall market growth.