The Commonplace & Poor’s 500 Index, or S&P 500, is maybe essentially the most well-known inventory index on the earth. The index consists of the five hundred largest publicly traded firms in the USA and gives a bellwether for the inventory market. This consists of shares from all 11 sectors of the financial system as outlined by the GICS classification system.
Be taught extra in regards to the S&P 500, together with its holdings and long-term efficiency.
Why S&P is an abbreviation for “market”
When folks ask, “How was the market as we speak?” they’re typically referring to the S&P 500.
Based on Commonplace & Poor’s, the index represents roughly 80% of the full worth of all shares traded within the U.S. market, and as such, the index is taken into account synonymous with the market itself.
Tens of trillions of {dollars} are invested within the firms included within the index, and buyers purchase shares in particular person firms instantly or by way of funds that monitor the index as a complete.
For a corporation, being added to the index just isn’t solely an honor, but in addition financially priceless.
When a brand new firm is added to the S&P 500, all mutual funds and exchange-traded funds (ETFs) that monitor the index should regulate by shopping for shares of the brand new inventory and promoting the previous inventory it replaces. And when internet new cash is added to an S&P 500 index fund, the fund firm should purchase shares inside it.
This shopping for has helped hold S&P 500 costs excessive. A excessive inventory value makes it cheaper for an organization to lift capital by issuing new shares, and usually makes the corporate extra enticing.
How are shares added to the S&P 500?
The businesses registered within the index change with sure regularity, with some firms being added and a few being eliminated. For instance, in February 2026, S&P Dow Jones Indices, which manages the S&P 500 index, added Ciena and eliminated Dayforce. In December 2025, S&P added Ares Administration and eliminated Keranova.
As of January 2026, the principle necessities to be listed are:
- Should be a US firm.
- Market capitalization should be at the very least $22.7 billion.
- You will need to have a optimistic revenue in the newest quarter and the previous 4 quarters mixed.
- Should have traded at the very least 250,000 shares in every six-month interval previous to inclusion within the index.
Commonplace & Poor’s additionally considers how the inclusion of shares maintains sector stability throughout the index. Index directors search a set of firms that gives a consultant picture of main U.S. firms.
S&P 500 is a weighted index
The S&P 500 is an index weighted in response to the dimensions of the businesses included within the index. The larger the corporate, the extra weight it carries. The weighting is determined by every firm’s market capitalization, or the full variety of shares excellent. Bigger firms are weighted extra closely within the index, however Commonplace & Poor’s makes changes based mostly on the quantity of inventory that’s really traded in the marketplace (or “quantity”) (versus the quantity of inventory that’s held again from the market).
S&P 500 Index values quoted (for instance, 6,836.17) are measured in factors, not {dollars}. That is the weighted common worth of all elements of the index. Because the constituent shares rise or fall, the index rises or falls in response to its calculations.
Different standard indexes embrace the Dow Jones Industrial Common, which tracks 30 shares throughout main sectors, and the Nasdaq Composite Index, which tracks greater than 3,000 firms on the Nasdaq alternate.
What are the biggest firms within the S&P 500?
The most important firms available in the market are closely represented within the index, and embrace some well-known names, together with the favored 7 Magnificent shares. Alphabet (Google’s mother or father firm) seems a number of occasions on the checklist as a result of it has a number of lessons of inventory.
Shares are ranked by their share of the index (in response to Slickcharts information as of February 20, 2026), and this weighting modifications over time as the corporate grows or shrinks.
- NVIDIA: 7.37%
- Apple: 6.2%
- Microsoft: 4.71%
- Amazon: 3.6%
- Alphabet (Class A): 3.15%
- Alphabet (Class C): 2.94%
- Metaplatform: 2.65%
- Broadcom: 2.52%
- Tesla: 2.47%
- Berkshire Hathaway: 1.72%
It’s value noting that these 10 shares alone account for about 37% of the full index worth. The opposite 490 shares account for the remaining 63% of the index’s worth. Consequently, the S&P 500 is closely weighted towards its largest constituents, which have market capitalizations within the trillions of {dollars}, actually greater than 100 occasions the bottom worth to be included within the index.
The S&P 500 has been a terrific funding for a few years
The S&P 500 is essentially the most adopted inventory index on the earth and some of the profitable inventory indexes. Over time, the index has returned a mean of about 10% per yr for individuals who have been investing for a very long time. However that does not imply you will get a ten% return in your funding yearly.
S&P can fluctuate within the quick time period. For instance, at one level final yr, the index was down greater than 17% from February 2025 to the top of the buying and selling day after U.S. President Donald Trump introduced his “Emancipation Day” tariff plan. Regardless of the heart-breaking decline, long-term buyers nonetheless had the higher hand.
That is the annualized complete return of the S&P 500 for 4 intervals ending February 20, 2026.
| time | 1 yr | 3 years | 5 years | 10 years |
|---|---|---|---|---|
| complete return (annualized) | 14.38% | 20.89% | 13.73% | 15.64% |
| Supply: S&P World |
This constant sturdy efficiency and broad diversification is why legendary investor Warren Buffett recommends that particular person buyers purchase an S&P 500 index fund, maintain onto it by way of thick and skinny, and ideally add extra money to their positions over time.
Shopping for an S&P 500 index fund is surprisingly straightforward, and one of the best index funds supply a low-cost method to personal your entire index, typically only a few {dollars} per $10,000 invested.
conclusion
The S&P 500 index tracks a whole lot of America’s largest and most profitable firms, giving buyers perception into one a part of the financial system. Additionally it is a stable basis for mutual funds and ETFs, permitting buyers to earn the enticing returns of an index at a decrease value.
— Bankrate’s Dayana Yochim contributed an replace.
Editorial Disclaimer: All buyers are inspired to conduct their very own unbiased analysis on any funding technique earlier than making any funding choices. Moreover, buyers ought to notice that previous efficiency of an funding product doesn’t assure future value appreciation.