S&P 500 Index
What it is:
How it works/Example:
The S&P 500 is not comprised of simply the 500 largest U.S. stocks. Instead, it consists primarily of leading companies from a wide variety of different economic sectors. The analysts choose to use the S&P as their preferred benchmark thanks to its diversified sector coverage as well as its market value weighting. Because the is weighted by , the largest firms have the greatest impact on the S&P's value.started with 23 identified sectors, but today contains over 100 unique sectors. Most
Why it matters:
The S&P 500equity . Many regard it as the single best way to track the overall performance of the largest and most dominant American companies.is probably the most commonly referenced U.S.
Because of thefunds track the performance of the S&P 500. However, many investors find that the most convenient and cost-effective way to trade this is to purchase a SPDR (Spider). A spider is an exchange-traded fund (ETF) that tracks the S&P 500. It has an extremely low expense ratio and can easily be bought or sold on the open just like a regular common stock.'s high cap requirements, the S&P 500 does reflect the performance of some of the smaller, but faster growing, companies on the . A number of different mutual