The S&P 500 is an index of 500 large cap (large company) US stocks, the index is the most popular benchmark for the US stock market. When people refer to a stock, ETF or mutual fund “beating the market” they are usually referring as to whether it beat the performance of the S&P 500 over some period of time. For example if your friend sold 100 shares of Starbucks she might say “I sold all my Starbucks shares yesterday, they were down 2% so far this year and market is up 10%. What a bad trade!” This index is also tracked and reported on daily across all media platforms.
What does S&P Stand For?
S&P stands for Standard & Poor’s. Standard and Poor’s is a financial services firm founded in 1860 and based in New York City. Along with producing a number of stock market indices for markets around the world they also issue credit ratings on public and private debt. You may remember their sketchy ratings played a significant part in the 2008 housing collapse. Along with other rating agencies Standard & Poor’s awarded top A ratings to risky mortgage securities.
What Companies are in the S&P 500?
Large US companies like Visa, AllState, 3M, Verizon, Google, Southwest Airlines, Microsoft, Corning, McDonald’s, Intel, Microsoft, Nike, Simon Property Group, etc. are in the S&P 500 index. You can view a full list here.
Investing in the S&P 500
The S&P 500 is the cornerstone of most individual investor’s portfolio. You can purchase a very, very, very low cost ETF or mutual fund that will closely track the S&P 500. SPY and IVV are two popular, high-quality ETFs. VFINX and FUSEX are two low cost mutual funds. If you’re new to investing this may be a good place to start (please do your own research first!).