What Is the S&P 500 Index?

The S&P 500 is calculated and maintained by S&P Dow Jones Indices. It measures the performance of the large-company segment of the US equity market and has been published in its present form since 1957. Membership is not simply a ranking by size: an index committee selects members from eligible US companies using published criteria such as company size, liquidity, public float and financial viability, and it also considers the balance of sectors. The index is designed to hold 500 companies.

Each member is weighted by its float-adjusted market capitalization, the share price multiplied by the number of shares available to public investors, so a company with a higher float-adjusted value has a larger effect on the index. The index level is a sum of these values divided by a divisor that S&P Dow Jones Indices adjusts when members change or companies take corporate actions, which is why the level is a number of points and not a price.

S&P Dow Jones Indices publishes price-return and total-return versions of the index. The figure quoted in the media is normally the price-return version, which does not include reinvested dividends. Many funds and futures contracts track the index, but the index itself cannot be bought, and those products can differ from it in cost and timing. It is often compared with the Dow Jones Industrial Average, which uses a different weighting method and a much smaller set of companies.