What is the S&P 500?

Find out what is the definition of the S&P 500 index.

The S&P 500 is a stock index that tracks 500 of the largest, publicly-traded companies in the US.

The S&P 500 is generally used as a benchmark figure by investors. That means they can use the index and compare it to their own investment portfolio to see how well their stocks have performed.

The S&P 500 is also used to gauge how the US economy is doing. If the index is increasing in value, that generally means the economy is doing well and vice versa.

What companies are on the S&P 500?

As its name suggests, the S&P 500 is comprised of 500 companies.

To be a part of the index, a company has to meet certain requirements. S&P 500 firms must;

  • Be based in the US
  • Be listed on a US stock exchange
  • Have a market capitalisation of at least $8.2 billion. Market capitalisation is the combined value of a company’s outstanding shares.
  • Have been profitable in the prior quarter, as well as in the prior 4 quarters combined
  • Have at least 250,000 of its shares traded in the prior 6 months

Companies can move in and out of the index if they stop being able to meet these requirements.

How is the S&P 500 structured?

The market capitalisation of the companies on the S&P 500 varies dramatically. The largest companies on the list often have market capitalisations that are substantially larger than the  other companies on the list.

The S&P 500 is structured in a way that takes these disparities into account. This is known as a weighting system as it gives greater influence to companies with larger market capitalisations, or ‘weight’, than it does to those with smaller ones.

The weighting system means that a company’s market capitalisation determines what percentage of the S&P 500 it makes up. For example, if one company made up 5 per cent of the total market capitalisation of all the companies on the S&P 500, it would be weighted so that 5 per cent of the index was comprised of that company.

More terms

Oligopoly

A situation in which a market or industry is controlled by a small group of companies.
Read more

Time Value of Money

The concept that money you have now is more valuable than the same sum in the future.
Read more

Synthetic ETFs

An ETF that that reproduces the return of an index through the use of swaps.
Read more

Investment Trust

A company that pools money together from multiple investors and then invests it.
Read more

Quick ratio

Learn what quick ratio stands for in financial terms and how to calculate it.
Read more

Interest Rate

The amount a lender charges for lending your money, or a borrower pays you for borrowing your money.
Read more

Diversification

An investment strategy in which money is put into a variety assets.
Read more

Collective investment scheme

Learn what's a collective investment scheme
Read more

After-hours trading

Trading outside of a stock exchange's opening hours.
Read more
Pick the plan that suits you best
Save 17% when you choose an annual subscription.
Basic
£0.00
/Month
Accounts
  • White check mark
    General Investment Account
Benefits
  • White check mark
    A great way to try Freetrade before transferring your ISA or pension
  • White check mark
    Unlimited commission-free trades. Other charges may apply.
  • White check mark
    Trade USD and EUR stocks at the exchange rate + 0.99% FX fee
  • White check mark
    Access to a selection of Freetrade’s 6,200+ global stocks and ETFs
  • White check mark
    1% AER on up to £1,000 uninvested cash
  • White check mark
    Fractional US shares
  • White check mark
    Access to mobile app and web platform
Standard
£4.99
/Month
£59.88 billed annually
Accounts
  • White check mark
    General Investment Account
  • White check mark
    Stocks and shares ISA
Everything in Basic and:
  • White check mark
    Access to 6,200+ global stocks and ETFs, including gilts
  • White check mark
    A lower FX fee of 0.59% on non-GBP trades
  • White check mark
    3% AER on up to £2,000 uninvested cash
  • White check mark
    Early market access with pre-market trading
  • White check mark
    Automated order types, including recurring orders
  • White check mark
    More stats and analysis, including analyst ratings and EPS estimates 
Plus
£9.99
/Month
£119.88 billed annually
Accounts
  • White check mark
    General Investment Account
  • White check mark
    Stocks and shares ISA
  • White check mark
    Personal pension
Everything in Standard and:
  • White check mark
    A lower FX fee of 0.39% on non-GBP trades
  • White check mark
    New! Access to mutual funds
  • White check mark
    Priority customer service
  • White check mark
    5% AER on up to £3,000 uninvested cash
  • White check mark
    Free, same day withdrawals
Basic
£0.00
/Month
Accounts
  • White check mark
    General Investment Account
Benefits
  • White check mark
    A great way to try Freetrade before transferring your ISA or pension
  • White check mark
    Unlimited commission-free trades. Other charges may apply.
  • White check mark
    Trade USD and EUR stocks at the exchange rate + 0.99% FX fee
  • White check mark
    Access to a selection of Freetrade’s 6,200+ global stocks and ETFs
  • White check mark
    1% AER on up to £1,000 uninvested cash
  • White check mark
    Fractional US shares
  • White check mark
    Access to mobile app and web platform
Standard
£5.99
/Month
billed monthly
Accounts
  • White check mark
    General Investment Account
  • White check mark
    Stocks and shares ISA
Everything in Basic and:
  • White check mark
    Access to 6,200+ global stocks and ETFs, including gilts
  • White check mark
    A lower FX fee of 0.59% on non-GBP trades
  • White check mark
    3% AER on up to £2,000 uninvested cash
  • White check mark
    Early market access with pre-market trading
  • White check mark
    Automated order types, including recurring orders
  • White check mark
    More stats and analysis, including analyst ratings and EPS estimates 
Plus
£11.99
/Month
billed monthly
Accounts
  • White check mark
    General Investment Account
  • White check mark
    Stocks and shares ISA
  • White check mark
    Personal pension
Everything in Standard and:
  • White check mark
    A lower FX fee of 0.39% on non-GBP trades
  • White check mark
    New! Access to mutual funds
  • White check mark
    Priority customer service
  • White check mark
    5% AER on up to £3,000 uninvested cash
  • White check mark
    Free, same day withdrawals

You’re just minutes away from commission-free investing

When you invest, your capital is at risk