The SandP 500: What is it?

One of the most widely used stock market indices in the world, the S&P 500 has nearly tripled in value in the past ten years

However, what is the S&P 500 and what companies are included in it?

An index of stocks that serves as a stand-in for the US stock market is the S&P 500.

Comprising 500 of the biggest US companies, the index accounts for about 80% of the nation's total market capitalization, or market cap. This indicates that it provides a good picture of the state of the US economy and stock market.

Although the S&P 500 represents 500 companies, it is actually made up of 504 stocks. This is due to the fact that some businesses, such as Alphabet, issue various stock classes that are listed as well.

Since the S&P 500 is a weighted index, each of the 500 companies represents a distinct proportion of the index. For instance, Apple accounts for about 7% of the S&P 500, whereas News Corp. only accounts for about 0.01%. Weighing the companies according to their market capitalization is how this is accomplished.

ETFs, or exchange-traded funds, frequently mirror the index, with their price (and, consequently, the investor's cash) rising or falling in tandem with the S&P 500's value.

Purchasing shares in such an ETF allows an investor to have their funds allocated proportionately among the index's various components. If you invest 100 in an ETF that tracks the S&P 500, for instance, about 73% of your money would track the performance of Apple, 56% of Nvidia, but only 2% of Hasbro.

This has become a very popular way to invest, particularly for retail investors who lack the time and motivation to keep a close eye on the market. The benefit of investing in the S&P 500 is that your money will generally grow along with the US economy.

Track every market on TradingView Businessman Warren Buffett, known as the Oracle of Omaha due to his consistently profitable investments, has held several S&P 500-linked exchange-traded funds (ETFs) and is renowned for having advised that "the goal of the non-professional should dot." be to own a variety of companies that, when taken as a whole, are sure to succeed. This will be accomplished by a cheap S&P 500 index fund.

However, if you choose to heed this advice and purchase an ETF that replicates the S&P 500, it is worthwhile to learn about the companies that make up the index, who manages it, and whether it is a secure investment.

Which companies are included in the S&P 500?

Although they are not necessarily the top 504 largest companies in the US, the S&P 500 includes 504 of the biggest stocks in the US.

Along with stocks like Netflix, Mastercard, Coca-Cola, Pfizer, and 490 other companies, the Magnificent Seven (Apple, Nvidia, Microsoft, Amazon, Meta, Tesla, and Alphabet) are notable names in the S&P 500.

The table that follows lists the ten companies with the highest weighting in the S&P 500.

SlickCharts, October 3, 2025.

The S&P 500 is the largest and most representative stock market index in the United States, but it is not the only important one.

The Dow Jones Industrial Average, which tracks 30 well-known US stocks, and the Nasdaq-100, which tracks 100 of the biggest non-financial companies listed on the Nasdaq stock exchange, are two other noteworthy indices. Tech stocks are typically linked to it.

Who makes the decisions about which businesses make the S&P 500?

With the help of Poors Publishing, the Standard Statistics Company first produced a stock index in 1923 that included 233 US stocks, which served as the model for the S&P 500. After the two businesses merged in 1941 to form Standard & Poor's (the S and P of S&P), it subsequently produced an index of 90 stocks.

The S&P 500 as we know it today was created in 1957, though the stocks that make up this index today are obviously very different. Since 2011, S&P 500 management has been handled by S&P Dow Jones Indices.

A company must satisfy a number of requirements based on market capitalization, liquidity, free float, time since initial public offering, and profitability in order to be included in the S&P 500.

The firm's eligibility to join the index will be determined by S&P Dow Jones Indices after these conditions are satisfied. It is important to remember that a company does not automatically join the S&P 500 even if it satisfies all the criteria.

When do companies in the S&P 500 change?

The S&P 500 is rebalanced every quarter, which means that the fund's manager, S&P Dow Jones Indices, will examine the 504 stocks that comprise the index and determine whether or not they should remain in it. In order to ensure that the index continues to accurately reflect the market, this is done.

Although the S&P 500 is rebalanced periodically, it may also be done in response to an unexpected and noteworthy event, like a bankruptcy, merger, or acquisition.

How secure are S&P 500 index funds?

Diverse investor types have distinct priorities. Some are happy to take a more detached approach, while others are prepared to micromanage their investments.

An S&P 500-linked index fund or exchange-traded fund (ETF) appears to be a better option for the latter group because risk is more dispersed and the inherent volatility that comes with having a large portion of your money invested in a single stock is reduced.

For example, you would lose a significant portion of your investment if you invested all of your money in ACME, an imaginary component of the S&P 500 that represented 0.01% of the index, and it turned out that the company had been lying about its earnings, which caused the stock price to fall. But if you simply invested in the index, you would probably only experience a slight loss because just 0.01% of your investment would be impacted.

Victoria Hasler, head of fund research at Hargreaves Lansdown, provided additional context by telling BFIA: "For investors who wish to have exposure to broad market indices, index funds can be an easy and affordable option.

"Investing in an S&P 500 index fund has several significant benefits, including: you know exactly what you are getting and shouldn't be unpleasantly surprised; performance will match the headline numbers you anticipate (though typically a little lower due to fees); and expenses are kept to a minimum.

However, even though investing in an S&P 500 index fund offers significant benefits like mitigation of high volatility and hedging, there may be drawbacks to consider.

Adding to this, Hasler said: "There are also some possible drawbacks to take into account, though: an index fund will never significantly beat the benchmark, you will eventually end up owning stocks that are either very expensive or that you dislike, and the index's concentration means that performance can be dominated by a small number of large stocks.

Of the 504 stocks that made up the S&P 500 index in March, the top 10 by weight made up 34.6 percent of the index. Nine of these stocks, or 32.7 percent of the index, are in the information technology sector.

Investors should be aware that they might not be getting as much diversification as they initially believed when purchasing an index of 500 stocks, she said, adding that "these figures are not necessarily good or bad."

A key component of creating your investment portfolio is diversification. Being exposed to a wide range of businesses and industries ensures that your entire portfolio won't suffer if one starts to perform poorly.

As Hasler points out, the S&P 500 is heavily weighted toward tech stocks, so if they begin to fall, so will your S&P 500 ETF and, consequently, your portfolio.

A downturn in technology, however, would only have a direct impact on the funds in your S&P 500 ETF if you were diversified and held 30% in the S&P 500, 40% in gold, and 30% in government bonds. In the meantime, your bonds and gold would most likely be much less impacted, lessening the harm to your finances.

When was the S&P 500 at its highest point?

As of February 2025, the S&P 500 had reached its highest point ever, 6,118, in January.

The S&P 500 has been steadily increasing over the past ten years, yielding 10-year returns of 2021.8%, despite the turmoil caused by the Covid-19 pandemic in 2020.

Strategies for S&P 500 investments.

To invest in the S&P 500, you must purchase shares of an exchange-traded fund (ETF) that replicates the index.

Popular exchange-traded funds (ETFs) include the IVV iShares Core S&P 500 ETF (LON:0JFF), SPDR S&P 500 ETF Trust (LON:OKZC), and VOO Vanguard S&P 500 ETF (LON:VUAG).

Examine several S&P 500 ETFs to determine which one best fits your needs before making your decision because they will have varying fees and configurations.

Even though it's safer to invest in an S&P 500 ETF than to engage in wild speculation, you could still lose money if the US stock market declines.

Although past performance does not guarantee future outcomes, historically, the S&P 500 recovered its losses and even increased in value quickly after a decline.

Can someone in the UK invest in the S&P 500?

Despite being an American index, you are able to invest in the S&P 500 if you are in the United Kingdom. The fact that investments will be made in USD rather than GBP, however, should alert you to exchange rate risk. The UK's FTSE 100 and FTSE 250 are the closest comparables to the S&P 500. If you are interested in investing in UK stocks instead of those in other countries, you might want to do more research on these indices.