S&P 500
From Free net encyclopedia
The S&P 500 is a list of 500 US corporations, ordered by market capitalization. The list is owned and maintained by Standard & Poor's.
All of the companies in the list are large publicly-held companies which trade on major US stock exchanges such as the New York Stock Exchange and Nasdaq. The market-value weighted performance of the stocks of these companies is known as the S&P 500 index. After the Dow Jones Industrial Average, the S&P 500 is the most widely-watched index of large-cap US stocks and is considered to be a bellwether for the US economy. It is often quoted using the symbol GSPC or SPX.
Many index funds and exchange-traded funds track the performance of the S&P 500 by holding the same stocks as the S&P 500 index, attempting to match its performance. Partly because of this, a company which has its stock added to the list may see a boost in its stock price as mutual fund managers are forced to purchase that company's stock in order to match their index funds' composition to that of the S&P 500 index.
In stock and mutual fund performance charts, the S&P 500 index is often used as a baseline for comparison. The chart will show the S&P 500 index, with the performance of the target stock or fund overlaid.
Although the 500 companies in the list are among the largest in the US, it is not simply a list of the 500 biggest companies. The companies are carefully selected to ensure that they are representative of various industries in the US economy. In addition, companies which are privately held and stocks which do not have sufficient liquidity are not in the index. By contrast, the Fortune 500 attempts to list the 500 largest public companies in the United States by gross revenue, regardless of liquidity and without adjustment for industry representation.
Contents |
Weighting
The index was previously market-value weighted; that is, movements in price of companies whose total market valuation (share price times the number of outstanding shares) is larger will have a greater effect on the index than companies whose market valuation is smaller.
The index has since been converted to float weighted; that is, only shares available for public trading ("float") are counted. The transition was made in two tranches, the first on March 18, 2005 and the second on September 16, 2005.
For example, only the Class A shares of Google ("GOOG") are publicly traded and, of the 207,096,000 Class A shares outstanding as of March, 2006, only 199,570,000 shares are considered float. The latter number is what was used when Google became a member of S&P 500 on March 31, 2006.
Components
To see a list of companies, please click on list of S&P 500 companies.
Investing
Apart from investing in the individual stocks in the S&P 500, there is also the possibility to invest in an exchange-traded fund (ETF) which represents ownership in a portfolio of the equity securities that comprise the Standard & Poor's 500 Composite Stock Price Index. This ETF is called the Standard & Poor's Depositary Receipts (SPDRs, pronounced "spiders"), and the ticker symbol is Template:Amex. There is also the lesser-known iShares S&P 500 Template:Amex, which has a slightly lower management expense ratio, but is otherwise identical to the SPDRs. Rydex also offers an ETF, Rydex S&P Equal Weight Template:Amex, which provides equal exposure to all the companies in the S&P 500.
Typical volume for the SPDR is over 42 million shares per day second only to QQQQ. The units of these ETFs, therefore, represent an opportunity for the investor to achieve the same performance of the S&P500 Index, and trade like any other stock on the Amex Exchange, so they can be bought on margin, sold short, or held for the long term.
Several mutual fund brokerages also provide index funds that track the S&P 500. Notable among them is The Vanguard Group's Template:Fund, which has over $100 billion USD in assets.