What Is the S&P 500?
The S&P 500 is the most widely followed gauge of the US stock market. It tracks about 500 of the largest publicly traded US companies and is often used as shorthand for “the market.” This guide explains what it is, how it is weighted, how it differs from other indices, and the common ways people invest in it.
What the S&P 500 is
The S&P 500 is a stock market index maintained by S&P Dow Jones Indices. It includes around 500 large-cap US companies chosen to represent the leading industries of the US economy, from technology and healthcare to financials, energy and consumer goods.
Because these companies together make up a large share of the total US market value, the index is treated as a broad barometer: when people say “the market was up today,” they often mean the S&P 500.
How it is weighted
The S&P 500 is market-capitalization weighted (based on free-float shares). A company’s weight is proportional to its market value, so the largest companies move the index more than the smallest ones.
That means a handful of megacap names can have an outsized effect on the index’s daily move — something you can see clearly on a heatmap, where the biggest tiles belong to the biggest companies.
S&P 500 vs Dow vs Nasdaq
- S&P 500 — ~500 large US companies, market-cap weighted; the broadest common benchmark.
- Dow Jones Industrial Average — only 30 companies and price-weighted, so it is narrower and less representative.
- Nasdaq-100 — 100 of the largest non-financial companies on the Nasdaq, heavily tilted toward technology.
How to invest in it
You cannot buy the index directly, but you can buy funds that track it. The most common are low-cost index ETFs such as SPY, VOO and IVV, which hold the same stocks in the same proportions as the index.
These funds aim to match the index’s return rather than beat it, which is why they typically charge very low fees. Many long-term investors use them as a core holding.
Historical returns
Over long periods the S&P 500 has delivered roughly high-single-digit to low-double-digit average annual returns including dividends, but with significant year-to-year swings and deep drawdowns along the way. Past performance does not predict future results.
A good way to build intuition is to test it yourself: use the return calculator to see what a lump sum or a monthly investment in an S&P 500 ETF would have grown to over different periods.
Frequently Asked Questions
How many companies are in the S&P 500?
About 500 — the exact count can vary slightly because a few companies have multiple share classes. They are selected to represent large-cap US equities across major sectors.
What is the difference between the S&P 500 and SPY?
The S&P 500 is the index itself. SPY is an ETF that holds the index’s stocks so you can invest in it; VOO and IVV are popular alternatives with similar goals and low fees.
Is the S&P 500 a good investment?
It is a broad, diversified, low-cost way to get exposure to large US companies, which is why it is a common core holding — but it still carries market risk and can fall sharply. This is not investment advice.
Not investment advice. For informational purposes only; not a buy/sell recommendation. Data may be delayed.