The S&P 500, or Standard and Poor's 500, is a stock market index that tracks the performance of 500 of the largest publicly traded companies in the United States. It is widely regarded as the primary benchmark for the overall health of the U.S. stock market. To be included, companies must meet strict criteria regarding market capitalization, liquidity, and profitability.
Unlike price-weighted indices, the S&P 500 is market-capitalization-weighted. This means companies with higher total market values exert more influence on the index's performance than smaller ones. The index covers approximately 80% of the total market value of U.S. equities. Because it spans diverse sectors such as technology, healthcare, and finance, it provides a broad view of economic conditions.
Investors often gain exposure to the index through index funds or exchange-traded funds, which aim to replicate its performance by holding the same stocks in the same proportions. Trading and investing in the stock market involve significant risk, including the potential loss of principal. Past performance does not guarantee future results, and market volatility can lead to substantial fluctuations in value over short periods.
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