S&P 500
Definition
A stock market index tracking 500 of the largest publicly traded companies in the United States, widely regarded as the best gauge of large-cap U.S. equities.
The Standard and Poor's 500 index is a market-capitalization-weighted index of 500 leading publicly traded companies in the United States. It covers approximately 80% of the total U.S. stock market value and is the most widely followed benchmark for overall market performance.
The S&P 500 is maintained by a committee that selects companies based on market cap, liquidity, financial viability, and sector representation. Unlike the Dow Jones, which only tracks 30 stocks, the S&P 500's broader coverage provides a more comprehensive view of the U.S. economy.
Historically, the S&P 500 has delivered average annual returns of approximately 10% before inflation. S&P 500 index funds are the cornerstone of many investment portfolios and are frequently recommended by financial advisors, including Warren Buffett, as the best long-term investment for most people.
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Related Terms
Dow Jones Industrial Average
financeA stock market index that tracks 30 large, publicly-owned companies trading on the NYSE and NASDAQ, serving as a benchmark for overall market performance.
NASDAQ
financeA global electronic stock exchange known for listing many technology and growth companies, and the index that tracks its performance.
Index Fund
financeA type of mutual fund or ETF designed to track the performance of a specific market index, offering broad diversification at low cost.
Market Capitalization
financeThe total market value of a company's outstanding shares of stock, calculated by multiplying share price by total shares outstanding.
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