After I learned about SPY and ETFs, I kept hearing about the S&P 500.
SPY is supposed to follow it. Investors watch it every day. News anchors talk about it like it’s the whole market.
So what is the S&P 500?
It’s not a company. It’s an index.
The S&P 500 is a list of 500 of the biggest and most important public companies in the United States.
S&P stands for Standard & Poor’s, the company that created the index.
The “500” means it includes 500 different companies.
These are usually companies that are leaders in their industries — like Apple, Amazon, Microsoft, Google, and many others.
Why does it matter?
The S&P 500 is like a scoreboard for the U.S. stock market.
If the S&P 500 goes up, it usually means the market is doing well.
If it goes down, people might worry about the economy or company profits.
That’s why investors, news channels, and even government officials watch it so closely.
It’s a quick way to check how hundreds of companies are doing all at once.
It represents almost the whole market
There are over 5,000 public companies in the U.S., but the 500 in the S&P make up about 80 percent of the total value of the stock market.
That means if you follow the S&P 500, you’re basically following the market.
And that’s why ETFs like SPY exist.
They give you exposure to all 500 of those companies in just one trade.
Some companies matter more than others
Not all 500 companies are equal.
The S&P 500 is weighted by market cap, which means bigger companies count more in the index.
For example, Apple is the most valuable company in the world.
So its stock price moves have a bigger effect on the S&P 500 than a smaller company like Etsy or Clorox.
So… can the S&P 500 go bankrupt?
Nope.
The S&P 500 isn’t a company. It doesn’t make products or hire employees.
It’s just a list, created by people who update it as companies grow, shrink, or drop out.
If one company does badly, it might get removed and replaced by a stronger one.
That’s another reason people trust it.
It constantly updates to reflect the strongest companies in the U.S.
What I Learned
- The S&P 500 is a list of the 500 biggest public companies in the U.S.
- It acts like a scoreboard for the entire stock market.
- ETFs like SPY are based on this index.
- The index changes over time as companies rise and fall.
Next time:
While I was learning about SPY and the S&P 500, I found out there are actually many different kinds of S&P 500 ETFs — each with its own rules, fees, and features.
In my next post, I’ll go deeper into the details and explain what I discovered when I compared them.
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