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Tuesday, Oct 29th

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S&P 500

SP 500

S&P 500 is an index that is owned and operated by a division of McGraw-Hill known as Standard & Poor's. S&P 500 is a free-float capitalization-weighted index. This is published since 1957 and consists of 500 large-cap common stocks actively traded in the United States. These stocks are only those which are largely held by public and which trade on either NASDAQ OMX or NYSE Euronext. S&P 500 is a part of S&P 1200 and S&P Global 1500 which are two larger indices.

The rules for selection for listing at S&P 500 are very similar to Dow 30. There are just 5 non-US companies included in the index. The companies which do not have enough liquidity or which are not publicly held are excluded or left out of the index. The index also leaves out the companies with extremely high stock price as they are difficult to trade. S&P 500, during trading sessions is updated every 15 seconds.

One can invest in S&P 500 either by purchasing individual shares or by buying the shares of an ETF (exchange-traded fund). One of the types of ETF is Standard & Poor's Depositary Receipts (SPDRs). The daily trade volume of SPDRs is the highest for any US stock amounting 200 million shares/day. The index also takes into account dividends, stock splits, share issuance and other complicated issues for the index maintenance.

There are many money making strategies used by experts by investing in S&P 500 index at definite periods. It is seen that S&P 500 is much stronger between November-April period. This means that one should not remain on a holding strategy throughout the year. One can stay out of the market and can go in cash in the weaker period i.e. May to October period. Hence, a better return on investments can be achieved during this period. This is also a way to reduce the risks by 50% as one is out of the market investment for 6 months.

After the Dow, S&P 500 is the most widely followed stock index in US for large caps. This is because since its inception, S&P 500 has maintained an impressive growth and is the best single gauge of equities market in US.