The S&P 500 is an exchange-traded index that reflects the overall state of the U.S. economy; it is an indicator of the U.S. stock market. The SP 500 index appeared in 1923. All top brokers offer the opportunity to trade this index.
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The SP500 historical chart — index composition
The SP500 chart historically shows the 500 most economically important companies for the United States. In total, these companies represent 4/5 of the total stock market capitalization. However, to the surprise of many investors, it is possible to find 505 stocks on the exchange. This is because some issuers issue several classes of financial assets.
Among the largest U.S. companies that are included, Microsoft, Apple, Amazon, Facebook, Berkshire Hathaway, Alphabet, JPMorgan Chase and Visa are especially worth mentioning. These companies are the engine not only of the U.S. economy, but also of the world economy.
The list contains companies from all sectors of the U.S. economy. Below is the share of each sector in the total capitalization of the index:
- Information Technology — 26%.
- Healthcare — 14.1%.
- Finance — 13.8%.
- Consumer staples — 12.9%.
- Industry — 9.5%.
- Power industry — 6.3%.
- Utilities — 2.9%.
- Real Estate — 2.9%.
- Telecommunications sector — 2%.
- Other industries — 9.6%.
The largest sector in the U.S. economy is IT, led by such giants as Google, Apple, Microsoft, and Facebook. Next in the top three are companies in healthcare and finance. Issuers related to telecommunications, real estate and utilities are at the end.
Live S&P 500 chart — criteria for companies that are included in the index
To be listed on the Live S&P 500 chart, a company must meet four main requirements:
- Market capitalization of $14.6 billion.
- The minimum monthly trading volume of its assets is 250,000 shares.
- Mandatory listing on the American stock exchange NASDAQ or NYSE.
- The head office of the company must be located in the United States.
These are the main criteria for selecting the issuer for inclusion in the stock index. At the same time, the number of criteria changes both upward and downward every quarter. Thus, the index composition may change every three months.
Until 2006, the index reflected only the total market capitalization of American companies. But later representatives of Standard and Poor’s changed the approach to estimating public companies and began to rank the list of issuers, considering the volume of their shares in free-float.
Index does not include a lot of low-liquidity companies, even if their market capitalization allows them to enter the list of the largest U.S. issuers.
The economic free-float score is also important, as its size will determine the company’s impact on the index’s stock quotes. For example, Apple has the largest free-float. This means that market changes in the value of its shares seriously affect the overall state. If we take as an example a company with a small free-float, its influence on the U.S. stock index will be minimal.
How the S and P 500 chart works live
The main evaluation criterion for the S and P 500 chart live is the market capitalization of the list participants. How the U.S. stock index is calculated:
- A list of the 500 largest U.S. companies by market capitalization is compiled.
- Each company is assigned a coefficient of influence.
- The values stock quotes are calculated.
The sum of capitalizations of all companies equals 100%. However, each issuer has a different impact on index quotations. The greater the issuer’s capitalization, the stronger is its effect on the market, and vice versa. This is because calculating is based on a weighted average value of market capitalization.
How to invest in the SP 500
The S&P 500 stock index is a basket of securities, not a holistic investment asset. Therefore, you cannot buy the directly. You can only copy the composition of the index and add all these securities to your portfolio. Each stock can be considered individually, because all companies have ups and downs. It is important to note that this can be quite onerous for the average investor.
Returns
Conservative investors who do not have the time or enough economic knowledge to analyze each stock of the company primarily enjoy investing in the stock index. Therefore, in this case, it is easier and safer to assemble a portfolio of assets and watch the growth of financial capital. In the long term, the index quotes are always moving up, as the U.S. economy is constantly growing. Follow the latest news about the index at letizo.com.
