S&P 500 Basics
S&P 500 is short for Standard and Poor’s 500 Composite Price Index. This index measures the performance of 500 companies over 11 sectors of business. Financial industry professionals use it as a marker to test the health of the US economy. In this article, we will explore the basics of how the S&P 500 works.
Who Is Eligible
To be eligible to be included in the index, a business must meet certain requirements. First, the total value of a company’s outstanding stock must be worth at least $8.2 million. This is also known as market capitalization. Second, the company must be based in the US. Third, the business must be a corporation and offer common stock. Fourth, the company’s stock must be listed on an eligible US exchange. Lastly, the company must have positive as-reported earnings as well as the four most recent quarters added together.
Currently, the top ten companies in the S&P 500 are Apple, Microsoft, Amazon, Nvidia, Tesla, Berkshire Hathaway, Alphabet Inc. Class A, Alphabet Inc. Class C, Exxon Mobil Corporation, and United Health Group.
Purchasing Into the S&P 500
The S&P 500 is not publicly traded, it is just a measuring tool. However, you can purchase shares through indexes that track it. Some examples include the Vanguard 500 Index Investor Shares, Fidelity 500 Index Fund, and Schwab S&P 500 Index Fund. Many investors like to use these funds because they generate an average 10% gain. However, there is no guarantee you will receive the same percentage of gains. To participate you will need to open an investment account.
If you are unsure how to proceed, you can meet with an investment advisor who can help you to set up an account and advise you on other investments you can utilize.
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