How Companies are Chosen in the SP 500

The S&P 500 is the stock market index of America. It is sometime referred to as “The S&P” or just “S&P 500”. It lists down the 500 companies that have common listed stocks in the biggest stock exchanges in the world: the New York Stock Exchange (NYSE) and the NASDAQ Stock Market (NASDAQ). To be listed in this index, companies must fulfill a series of requirements.

Because the basis of the S&P 500 is the market capitalization index, companies that are able to enter the list have contributions equal to their value. To be included here, your company must have satisfied the following high standards:

Market Capitalization Not Lower Than $5 Billion

The first and perhaps the steepest requirement is the market capitalization that must be at least $5 billion. Your company must be quite big and have a significant profit generation to sustain a market capitalization as big as that

The Company Must Be Based in the US

The S&P 500 is arguably the most accurate indicator of the US market. For this reason, only companies in the US are allowed in the list. So even if you have the market capitalization worth more than $5 billion, if you’re not based on the US, then you won’t appear on the S&P.

Complete Four Consecutive Quarter of Positive Revenue

If maintaining a multi-billion dollar company wasn’t hard enough, you must also ensure that it is consistently giving a stellar performance and earning more and more. Well, for big companies like Apple, perhaps it is easy.

There are more criteria that companies must pass such as meeting liquidity levels and being approved by the S&P Index committee, economists, analysts, and other experts at the S&P but the ones mentioned above are the main criteria.

The S&P 500 is possibly the most trusted index for one of the largest economies in the world. It has the right to be so.