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

Simple pricing plans

Choose how you'd like to pay:

Annually

Save 17%

Monthly

Annually

Save 17%

Monthly

£0.00/mo

Accounts

GIA pink
General investment account

Benefits

  • Commission-free trades (other charges may apply. See full pricing table.)
  • Trade USD & EUR stocks at the exchange rate + a 0.99% FX fee
  • Fractional US Shares
  • Access to more than 4,700 stocks, including the most popular shares and ETFs
  • 1% AER on up to £1,000 uninvested cash
£4.99/mo

£59.88 billed annually

£5.99/mo

Billed monthly

Accounts

GIA white
General investment account
ISA
Stocks and shares ISA

Benefits
Everything in Basic, plus:

  • Full range of over 6,200 US, UK and EU stocks and ETFs
  • Trade USD & EUR stocks at the exchange rate + a 0.59% FX fee
  • Automated order types, including recurring orders
  • Advanced stock fundamentals
  • 3% AER on up to £2,000 uninvested cash
£9.99/mo

£119.88 billed annually

£11.99/mo

Billed monthly

Accounts

GIA white
General investment account
ISA
Stocks and shares ISA
SIPP white
Self-invested personal pension (SIPP)

Benefits
Everything in Standard, plus:

  • Trade USD & EUR stocks at the exchange rate + a 0.39% FX fee
  • Priority customer service
  • Freetrade Web beta
  • 5% AER on up to £3,000 uninvested cash

Download the app to start investing now



When you invest your capital is at risk.