Did you know that $11.2 trillion of assets is benchmarked against the S&P 500’s Composite Index? It is a common sight to see the S&P 500 on television, in newspapers, and, most likely, to see our investments’ performance against it. It is worth learning more about the S&P 500, which represents approximately 80% of the U.S. equity market’s value. 1
The Standard & Poor’s Index Committee maintains the index as it exists today. Contrary to popular belief it does not include the 500 largest American companies. It is made up of large-cap stocks from a wide range of markets, including technology, energy, and consumer staples. To be included in the index, a company must meet a few criteria. To be considered for inclusion in the index, a company must meet a number of criteria.
Another misconception is that the index is static. Companies may be removed from the index for violating any of the criteria for adding them or for significant restructuring such as bankruptcy.
According to the most recent data, the index’s 2017 turnover was 5.2%. One study found that nearly half the companies comprising the S&P 500’s constituent companies had a turnover of 5.2% in 2017. This is according to the most recent data.
Many mutual funds and exchange-traded funds looking to replicate the index might have to sell the stocks they are losing and purchase the new stocks to follow the index’s progress. Remember that mutual funds … Read More