S&P 500: A Stock Market Index of 500 Largest Companies Traded on United States Stock Exchanges
The S&P 500 or Standard & Poor’s 500 index is a marketplace index of the five hundred biggest publicly traded US companies. The index is the best indicator of broad US stocks. Among other general US stock market indices, we can list the Dow Jones Industrial Average, Russell 2000 indices.
You can calculate the weight of each company in the index by taking the size of the company’s market capitalization and dividing it by the total market value of the index.
To analyze, you can calculate a company’s market value by taking its current stock price and multiplying the company’s stock by its outstanding shares. Fortunately, the S&P 500 frequently publishes the total market cap and market caps of individual companies, and investors do not need to calculate it on financial websites.
Features of S&P 500
The S&P 500 is a variable weighted index. That is, the company market is adjusted by the number of shares available for IPO. The index is the best indicator of broad US stocks. For this reason, there are many funds designed to monitor the performance of the S&P 500.
S&P only uses publicly traded shares. The S&P 500 adjusts each company’s market cap to prevent new share issues or mergers. they find the value of the index by adding the adjusted market values of each company and dividing the results by a divisor. However, the dividing number is a value that S&P does not share with the public.
Still, you can calculate a company’s weight in the index, which provides valuable information to investors. It is possible to predict whether the stock will be in the index from the downward and upward movements.
S&P 500 and Other Indices
The S&P 500 is typically the index favored through institutional investors. The Dow Jones Industrial Average, on the other hand, is historically associated with the US stock market index of commercial investors. Institutional investors feel that the S&P is more representative of the US stock markets. This is because the S&P index covers many more sectors than the DOW 30 (30 versus 500).
Also, the S&P 500 uses a market capitalization weighting method that gives a higher percentage allocation to companies with the largest market capitalizations. On the other hand, the DJIA is a price-weighted index that gives higher index weights to firms with high stock prices. The market capitalization weighting structure is more common in US indices than the price weighted method.
Let’s take the example of Apple as an example. To understand how stocks affect the S&P 500 index, individual market weights need to be calculated, which is the market capitalization of each company divided by the total market capitalization of the index.
Apple Inc. (AAPL) suggested 4,801,589,000 middle not unusualplace stocks in its 2018 profits document and had a inventory fee of $148.26 on the time. Apple’s marketplace capitalization was $711.9 billion.
-The S&P 500 had a complete marketplace cap of approximately $23 trillion. This is the sum of the market capitalizations of all the shares in the index.
-Apple’s weight in the index was 3%. This equates to $711.9 billion/$23 trillion.
How Does the S&P 500 Work?
A committee selects each of the S&P 500 companies in the index based on their liquidity, size and industry. They rearrange and balance the index in March, June, September and December.
To be included in the index, a company must be located in the United States and have a market capitalization of at least $6.1 billion. In addition, at least 50% of the company’s shares must be publicly traded. The share price must be at least $1 per share. At least 50% of their fixed assets and income must be in the USA. Finally, it must have at least four consecutive positive earnings quarters.
The S&P 500 includes real estate investment trusts and business development companies. Stocks must be listed on the New York Stock Exchange, Investor Exchange, NASDAQ or BATS. It cannot be over-the-counter or listed on the over-the-counter markets.
Top 10 companies with a high market share in the S&P 500
Although there are many companies in the S&P 500, all stocks can be ranked according to their ratios, as everywhere else. Here are the top 10 companies with the highest market share on the list: Apple, Microsoft, Amazon, Berkshire Hathaway Inc. Class B, Facebook, JP Morgan Chase, Johnson & Johnson, Exxon Mobil, Alphabet Inc. Class C, Procter & Gamble Company and Alphabet Inc. Class A.