What is the S&P 500 Index?

Introduction

The S&P 500 Index is probably the most widely followed stock market index, probably because it is one of the oldest stock market indexes, having started in 1957. The S&P 500 Index is made up of stocks selected by a committee at Standard & Poor's. To be eligible a stock must be:

Constituent selection is at the discretion of the S&P index committee and is based on the eligibility criteria. The S&P 500 Index normally has around 500 stocks, but the number can be a few more than that if the committee deems it warranted. Sector balance, as measured by a comparison of each GISC sector's weight in the S&P 500 Index with its weight in the S&P Total Market Index, is also considered in the selection of companies for the S&P 500 Index.

Unlike most stock market indexes, the S&P 500 Index is not reconstituted on a regular basis. Instead, changes to index composition are made on an as-needed basis. Changes in response to corporate actions and market developments can be made at any time. Constituent changes are typically announced one to five days before they are scheduled to be implemented. S&P does not always remove from the S&P 500 Index an existing stock that is currently violating one or more of the eligibility rules, as S&P tends to believe there is value in consistency and continuity.

There are now hundreds of companies that prepare stock market indexes, but Standard and Poor's is one of the four companies that dominate the index industry, along with MSCI, FTSE Russell, and NASDAQ. You can get a pretty good gauge of the index industry by looking at the number of exchange traded funds that are tracking indexes from particular index providers - see list of index providers for ETFs.

GISC sectors

Since part of S&P's goal with the S&P 500 Index is to have it be representative of the stock market as a whole based on GICS sectors, let's look at the current breakout of the S&P 500 Index by sector:

S&P 500Total market
GISC Sector# of StocksMarket cap% # of StocksMarket cap%
Communication Services26$4,569,905,207,98314.3%170$5,163,459,680,68412.6%
Consumer Discretionary61$3,748,987,994,13411.7%452$5,096,853,172,29512.4%
Consumer Staples32$2,382,263,633,7847.5%161$2,738,249,919,0626.7%
Energy25$588,132,969,8601.8%205$694,165,144,2821.7%
Financials64$3,001,978,773,4939.4%946$4,568,454,393,64311.2%
Health Care63$4,136,348,921,23412.9%958$5,438,616,712,62713.3%
Industrials73$2,567,191,529,7218.0%517$3,446,906,341,1238.4%
Information Technology72$8,478,603,749,52326.5%571$10,421,760,426,69125.4%
Materials28$780,924,123,7212.4%176$993,469,002,4512.4%
Real Estate31$793,159,062,0112.5%227$1,237,552,429,0353.0%
Unknown1$3,810,256,1790.0%193$86,390,239,4770.2%
Utilities28$891,774,845,2202.8%77$1,069,299,303,1432.6%
Total504$31,943,081,066,863100% 4,653$40,955,176,764,513100%

When we say "total market" in this article, we are talking about all common stocks, REITs and mortgage REITs of U.S. companies that trade on the U.S. stock market. So that excludes MLPs, preferred stocks, ADRs, and investment funds, and the common stocks of non-US companies that trade on the U.S. stock market. In terms of market capitalization, the S&P 500 currently captures 78.0% of the total market.

The Russell 1000 Index is another popular stock market index. The Russell 1000 Index is a little simpler than the S&P 500 Index in that the Russell 1000 Index consists of the 1,000 largest U.S. common stocks (including REITs) based on market capitalization. Let's compare the S&P 500 Index to the Russell 1000 Index:

S&P 500Russell 1000
GISC Sector# of StocksMarket cap% # of StocksMarket cap%
Communication Services26$4,569,905,207,98314.3%56$5,017,291,952,48712.3%
Consumer Discretionary61$3,748,987,994,13411.7%114$4,610,257,450,78811.3%
Consumer Staples32$2,382,263,633,7847.5%55$2,568,375,293,9186.3%
Energy25$588,132,969,8601.8%34$625,882,506,3381.5%
Financials64$3,001,978,773,4939.4%143$3,522,344,077,0168.6%
Health Care63$4,136,348,921,23412.9%124$4,779,671,909,02311.7%
Industrials73$2,567,191,529,7218.0%142$3,066,895,980,0367.5%
Information Technology72$8,478,603,749,52326.5%174$9,969,877,154,83724.3%
Materials28$780,924,123,7212.4%53$952,446,277,7402.3%
Real Estate31$793,159,062,0112.5%77$1,071,942,000,4372.6%
Unknown1$3,810,256,1790.0%1$3,810,256,1790.0%
Utilities28$891,774,845,2202.8%38$979,022,128,8562.4%
Total504$31,943,081,066,863100% 1,011$37,167,816,987,655100%

Size Categories

The S&P 500 Index is considered to be a "large cap" or "large capitalization" stock index. But as explained in our article size categories, there is no standard definition of what makes up a "large cap" stock. Each of the major index providers (MSCI, S&P, NASDAQ, FTSE Russell) uses a different approach to build "large cap" indexes. On our website, we use a cutoff of $10 billion to determine a large cap stock. This is a just a widely used rule of thumb that we have also chosen to use. Similarly, a "mid cap" stock under our definition is a stock with a market capitalization between $2 billion and $10 billion.

Let's look at the stocks in the S&P 500 Index based on the size categories we use:

S&P 500Total market
Size Category# of StocksMarket cap% # of StocksMarket cap%
Large cap422$31,379,321,688,61998.2%583$35,754,410,564,68487.3%
Mid cap82$563,759,378,2441.8%874$3,931,255,049,4999.6%
Small cap0$00.0%1,269$1,096,343,333,2472.7%
Micro cap0$00.0%1,916$173,167,817,0830.4%
Unknown0$00.0%11$00.0%
Total504$31,943,081,066,863100% 4,653$40,955,176,764,513100%

Dividend Yield

The S&P 500 Index historically has had a dividend yield of around 1.7% to 2.0%. Generally, the large cap stocks in the S&P 500 Index have a slightly higher dividend yield than the stock market as a whole (i.e. small cap stocks have a slightly lower dividend yield than large cap stocks).

Using the data in our database as of today, here are the current market capitalization weighted average dividend yields of the S&P 500 compared to the Russell 1000 Index, the Russell 2000 Index (i.e. small cap stocks) and the stock market as a whole:

CategoryStock CountAverage Dividend Yield
S&P 5005041.60%
Russell 10001,0111.53%
Russell 20002,0131.44%
Total market4,6531.49%

The Russell 2000 Index consists of the smallest 2,000 U.S. common stocks in the Russell 3000 Index, which includes the largest 3,000 U.S. common stocks based on market capitalization. The Russell 2000 Index is one of the most popular "small cap" indexes.

Performance

Let's look at the performance of the S&P 500 Index using SPY, the SPDR S&P 500 ETF. Is there anything special about the stocks included in the S&P 500 Index? Let's compare the performance of SPY to NQUSL, the NASDAQ US Large Cap Index. The NASDAQ US Large Cap Index includes the top 75% of all U.S. stocks based on market capitalization.


The above graph suggests that although the S&P 500 Index is widely followed, there really isn't anything special about it in terms of performance.

As explained above, the S&P 500 Index mostly consists of large cap stocks. How does the performance of large cap stocks compare to the total stock market? Let's compare the performance of SPY to VTI, the Vanguard Total Stock Market ETF. VTI tracks the CRSP US Total Stock Market Index.

First, let's compare the market price of SPY to VTI:


Second, let's compare the total return of SPY to VTI:


Note that on our website, when you see a "-TR" symbol, such a symbol is a symbol we invented that references our calculations of the total return of an exchange traded fund (ETF). The total return symbol, or "-TR" symbol, includes the market price performance plus any dividends from that ETF reinvested.

Let's also look at the performance of the S&P 500 Index compared to the Russell 1000 Index. Again, we will use ETFs for our analysis. Let's compare the performance of SPY, the SPDR S&P 500 ETF, to IWB, the iShares Russell 1000 ETF. Let's start with the market price performance:


Second, let's compare the total return of SPY to IWB, again using the computed "-TR" symbols for these ETFs:


The takeaway from the above charts is that over long periods of time, small and mid cap stocks tend to outperform large cap stocks. Thus, IWB outperforms SPY, as the Russell 1000 includes more "mid cap" stocks than the S&P 500 Index, and VTI outperforms SPY, as VTI tracks a total market index that includes small cap and mid cap stocks.

One way to visualize this is to look at a "ratio symbol" that shows the market price of IWB divided by the market price of SPY:


Note, however, that despite the long-term trend of small and mid cap stocks outperforming large cap stocks, there can be shorter time frames where that is not the case. Notice, for example, that if you look at the ratio symbol IWB:SPY for the past five years, IWB has not outperformed SPY:


ETFs that track

Because the S&P 500 Index is so widely followed, there are a lot of exchange traded funds ("ETFs") that track the S&P 500 Index:

SymbolDescriptionInception DateLeverage FactorMarket capAction
IVViShares Core S&P 500 Index Fund ETF05/15/20001.00$222,572,437,500Analyze
SDSUltraShort (2x) S&P 500 ETF07/11/2006-2.00$1,012,425,454Analyze
SHProShares Short S&P 500 ETF06/19/2006-1.00$2,760,894,151Analyze
SPDNDirexion Daily S&P 500 Bear 1x Shares ETF06/08/2016-1.00$161,402,159Analyze
SPUUDirexion Daily S&P 500 Bull 2X Shares ETF05/28/20142.00$19,648,081Analyze
SPXLDirexion Large Cap Bull 3x Shares ETF11/05/20083.00$1,594,593,058Analyze
SPXSDirexion Daily Large Cap Bear (3x) ETF11/05/2008-3.00$656,403,466Analyze
SPXUProShares UltraPro Short S&P500 ETF06/23/2009-2.00$789,608,910Analyze
SPYSPDR S&P 500 ETF01/22/19931.00$303,646,800,566Analyze
SSOProShares Ultra S&P500 ETF06/19/20062.00$2,642,480,000Analyze
UPROProShares UltraPro S&P 500 (3x) ETF06/23/20093.00$1,603,475,500Analyze
VOOVanguard S&P 500 ETF09/07/20101.00$167,056,860,509Analyze


All data is a live query from our database. The wording was last updated: 03/27/2019.

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