What is the S&P 500 Index?

The S&P 500 Index, also known as the Standard & Poor’s 500 Index or simply the S&P 500, is a market capitalization-weighted index of 500 large publicly traded companies in the United States. It is one of the most representative stock indices of the U.S. market.

The index is not simply a ranking of the top 500 companies in the U.S. by market capitalization. Companies included in the index must also meet criteria such as liquidity and profitability.

The S&P 500 Index is widely regarded as one of the most important indices for gauging the overall performance of the U.S. stock market. The component stocks of the S&P 500 Index account for approximately 80% of the total market capitalization of the U.S. stock market, making it highly influential and informative.

Weighting Method and Calculation of the S&P 500 Index

The S&P 500 Index uses a market capitalization-weighted method, specifically the float-adjusted market cap weighting. This means that companies with larger market capitalizations have a higher proportion and influence in the index.

Weight of a company in the S&P: Company’s float-adjusted market capitalization / Sum of all companies’ float-adjusted market capitalizations

The S&P 500 Index calculates and references based on the “float-adjusted market capitalization,” which refers to the publicly traded shares available in the market.

The total float of the S&P 500, as well as the float of each individual company, is proprietary information exclusive to S&P and not publicly disclosed.

Compared to the price-weighted calculation method used by the Dow Jones Industrial Average, the market capitalization-weighted approach better reflects a company’s weight and influence on the overall stock market.

Other S&P Indices：S&P 400: Mid-Cap Index,S&P 600: Small-Cap Index

The S&P 500 is part of the S&P Global 1200 Index series. Other included indices are the S&P MidCap 400, representing companies in the mid-cap range, and the S&P SmallCap 600, representing small-cap companies.

By combining the S&P 500, S&P MidCap 400, and S&P SmallCap 600, the S&P Composite 1500 Index is created, which covers approximately 90% of the total market capitalization of the U.S. stock market, providing a more comprehensive view of the overall U.S. market.

Requirements for S&P 500 Constituents

For a company to become a constituent of the S&P 500 Index, it must not only be one of the top 500 largest U.S. companies by market capitalization but also meet specific criteria set by the committee overseeing the index.

For example, the company must be listed in the United States and meet certain market value, liquidity, and profitability standards. Additionally, it must have gone public at least one year prior to qualifying.

The detailed rules are as follows:

• U.S. company (headquartered in the U.S.)
• Market capitalization of at least $14.5 billion
  • Source: S&P Dow Jones Indices. “Methodology for S&P U.S. Indices,” page 7.
• Average trading volume exceeds the market capitalization
• At least 250,000 shares traded in the past six months
• More than 50% of shares are held by the public
• IPO conducted at least one year ago
• Positive earnings in the past four quarters and positive earnings in the most recent quarter

Timing and Frequency of S&P 500 Component Changes

The S&P 500 index adjusts its component stocks four times a year, in March, June, September, and December.

The most recent rebalancing of the S&P 500 was announced on September 1, 2023, and took effect before the market opened on September 18, 2023.

Changes in component stocks on September 1, 2023: Blackstone Inc. – BX (NYSE) and Airbnb Inc. – ABNB (NASDAQ) replaced Lincoln National Corp. – LNC (NYSE) and Newell Brands Inc. – NWL (NASDAQ).

Top 10 Constituent Stocks of the S&P 500

The S&P 500 Index represents over 80% of the total market value of the U.S. stock market, with the top ten companies by market capitalization (in descending order) as follows:

• Microsoft Corporation (NASDAQ: MSFT)
• Apple Inc. (NASDAQ: AAPL)
• Amazon.com, Inc. (NASDAQ: AMZN)
• Nvidia Corp (NASDAQ: NVDA)
• Alphabet Inc A (NASDAQ: GOOGL)
• Meta Platforms, Inc. Class A (NASDAQ: META)
• Alphabet Inc C (NASDAQ: GOOG)
• Berkshire Hathaway B (NYSE: BRK-B)
• Tesla, Inc. (NASDAQ: TSLA)
• UnitedHealth Group Incorporated (NYSE: UNH)

Data as of October 31, 2023.

The official list of all constituent stocks of the S&P 500 is not publicly disclosed. To see the complete list of constituent stocks, you can visit this website: S&P 500 Complete Constituent Stocks.

S&P 500 Constituent Stock Industry Types

Among the S&P 500 constituent stocks, the Information Technology sector has the highest proportion, accounting for approximately 30%. The next sectors in order are Health Care, Financials, Consumer Discretionary, Communication Services, Industrials, Consumer Staples, Energy, Utilities, Materials, and Real Estate.

S&P 500 Average Annual Return Rate

The average annual return rate of the S&P 500 is 7.69% (from 1928 to 2022). The table below shows the historical returns of the S&P 500 over the past ten years (excluding dividends).

Year	Return Rate
2013	29.6%
2014	11.39%
2015	-0.73%
2016	9.54%
2017	19.42%
2018	-6.24%
2019	28.88%
2020	16.26%
2021	26.89%
2022	-19.44%

Data as of November 12, 2023.

To reference the opening, high, low, and closing data of the S&P 500 each year since 1928, you can visit this website: S&P 500 Historical Annual Returns.

Is the S&P 500 Index Dividend-Paying?

The S&P 500 is an index and does not directly pay dividends.

However, ETFs that track the performance of the S&P 500 Index, such as the SPDR S&P 500 ETF Trust (SPY) and Vanguard 500 ETF (VOO), do pay dividends.

For example, the dividend yield of SPY is approximately 1.5%. It collects dividends from all the companies in the S&P 500 Index that pay dividends and distributes them to the holders of SPY ETF.

How to Invest in the S&P 500 Index?

Holding the S&P 500 Index for the long term often yields better results compared to actively managed portfolios. However, since the S&P 500 is an index, it cannot be directly traded. ETFs that track the S&P 500 are suitable for investors who are willing to take on moderate risk and want exposure to the U.S. stock market. From 1928 to 2022, the S&P 500 has had an average annualized return (excluding dividends) of 7.69%.

How to Go Long on the S&P 500?

One way to invest in the S&P 500 is by purchasing mutual funds or ETFs that track the index, such as the SPDR S&P 500 ETF Trust (SPY) or Vanguard 500 ETF (VOO). These funds have performance that mirrors the performance of the S&P 500 Index itself.

Investors should consider expense ratios and other factors when choosing an ETF. The expense ratio for SPY is approximately 0.09%, while the expense ratio for VOO is about 0.03%.

How to Short the S&P 500?

It is possible to short the S&P 500 ETF, invest in inverse S&P 500 ETFs, or purchase put options on the S&P 500 ETF.

For example, one can short the SPDR S&P 500 ETF Trust (SPY) or Vanguard 500 ETF (VOO), or buy inverse S&P 500 ETFs (such as Direxion Daily S&P 500 Bear Leveraged ETFs), which have performance that is opposite to the S&P 500 Index, meaning they rise when the S&P 500 falls. There are also leveraged inverse ETFs that provide returns opposite to the S&P 500 Index with two or three times the magnitude.

When shorting, it is important to note that these inverse ETFs only have completely opposite daily performance, and if the S&P 500 declines in the long term, they can amplify the magnitude of the decline, resulting in deviations over the long term.

Reference article: Traps of Inverse ETFs

Related Financial Products Tracking the S&P 500

SPY: SPDR S&P 500 ETF Trust

• Inception Date: January 22, 1993
• Issuer: SPDR (State Street Global Advisors)
• Total Expense Ratio: 0.095%
• Index Tracked: S&P 500 Index
• Dividends: Quarterly
• Dividend Yield: 1.62%

SPY is the oldest ETF and one of the largest by trading volume. It is widely known, similar to Taiwan’s 0050. Although it has a higher expense ratio compared to other S&P 500 tracking indices, it is still a popular choice for many investors.

Other ETF issuers have also launched ETFs tracking the S&P 500, such as VOO and IVV. In order to compete with other ETFs, SPDR Group later launched SPDR Portfolio S&P 500 ETF (SPLG) with lower expense ratios, but it has relatively lower trading volume and recognition.

IVV: iShares Core S&P 500 ETF

• Inception Date: May 15, 2000
• Issuer: iShares (BlackRock)
• Total Expense Ratio: 0.03%
• Index Tracked: S&P 500 Index
• Dividends: Quarterly
• Dividend Yield: 1.59%

IVV is the second-largest ETF tracking the S&P 500 Index. It has slightly lower differences and custody fees compared to SPY. The initial expense ratio was 0.04%, but due to fierce market competition, it was lowered to 0.03% in 2019, attracting many investors to join.

VOO: Vanguard S&P 500 ETF

• Inception Date: September 7, 2010
• Issuer: Vanguard
• Total Expense Ratio: 0.03%
• Index Tracked: S&P 500 Index
• Dividends: Quarterly
• Dividend Yield: 1.67%

VOO, issued by Vanguard, tracks the S&P 500 Index and has the same expense ratio as IVV, which is 0.03%. It is the third-largest ETF tracking the S&P 500.

Other tracking targets for the S&P 500:

Long Positions

Fund Name	Ticker	Direction	Leverage	Expense Ratio (%)	Inception Year
SPDR S&P 500 ETF Trust	SPY	Long	1	0.095	1993
Vanguard S&P 500 ETF	VOO	Long	1	0.03	2010
iShares Core S&P 500 ETF	IVV	Long	1	0.03	2000
Yuanta S&P 500 ETF	00646	Long	1	0.61	2015
SPDR Portfolio S&P 500 ETF	SPLG	Long	1	0.02	2005
ProShares Ultra S&P 500	SSO	Long	2	0.91	2006
Direxion Daily S&P 500 Bull 2x Shares	SPUU	Long	2	0.74	2014
Yuanta S&P 500 2x Bull ETF	00647L	Long	2	1.19	2015
ProShares UltraPro S&P 500	UPRO	Long	3	0.92	2009
Direxion Daily S&P 500 Bull 3X Shares	SPXL	Long	3	1	2008

Short Positions

Fund Name	Ticker	Direction	Leverage	Expense Ratio (%)	Inception Year
Direxion Daily S&P 500 Bear 1X Shares	SPDN	Short	1	0.62	2016
ProShares Short S&P 500	SH	Short	1	0.88	2006
Yuanta S&P 500 1x Bear ETF	00648R	Short	1	1.27	2015
ProShares UltraShort S&P 500	SDS	Short	2	0.9	2006
ProShares UltraPro Short S&P 500	SPXU	Short	3	0.9	2009
Direxion Daily S&P 500 Bear 3X Shares	SPXS	Short	3	1.08	2008

What is the ticker symbol for the S&P 500?

The S&P 500 Index has several ticker symbols, including ^GSPC and INX. However, the index itself cannot be directly traded; financial products that track the S&P 500 Index must be selected for trading.

Financial products that track the S&P 500 include options on the S&P 500 Index (SPX), S&P 500 ETFs such as SPY, VOO, IVV, and products like the Taiwan Stock Exchange’s 00646 that track the S&P 500.

Why Does the S&P 500 Have 503 Ticker Symbols?

The S&P 500 consists of a total of 500 component companies, but three companies have two ticker symbols, resulting in a total of 503 ticker symbols for the index.

For example, Alphabet, the parent company of Google, is included in the index, and both its Class A shares (GOOGL) and Class C shares (GOOG) are part of the index’s components, leading to the phenomenon of having more than 500 ticker symbols.

When Was the S&P 500 Created?

The origin of the S&P 500 can be traced back to 1923 when the Standard Statistics Bureau and Poor’s Publishing introduced a series of indices covering 233 companies and 26 industries.

In 1941, Poor’s Publishing merged with Standard Statistics Company to form Standard & Poor’s Corp. The S&P 500, as known today, was launched on March 4, 1957.

Why is it Called Standard & Poor’s?

The first S&P index was established in 1923 by the collaboration of the Standard Statistical Bureau and Poor’s Publishing. The initial index included 233 companies. The two companies merged in 1941 to become Standard & Poor’s.

Summary

The S&P 500 index is one of the most widely followed indexes in the U.S. stock market. It represents the 500 largest and most liquid companies in the U.S., spanning various industries including technology, commodities, finance, and industrial sectors.

Although the S&P 500 index was created by a private company, it has now become a commonly used benchmark for evaluating the overall performance of the U.S. market economy.

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