What is the Standard & Poor’s 500

Stock market indices are one of the most important aspects of stock trading. Naturally, knowledge about them is essential to any trader.

The Standard & Poor’s 500 Stock Index or the S&P 500 is the U.S. market’s leading indicator for local equities. It is composed of companies in varying sectors such as consumer staples, healthcare, financials, information technology, energy, etc. As the benchmark of the US stock market, the S&P 500 offers a great opportunity for diversification and a good indicator for the US economy.

The index is composed of 500 stocks hand-picked by the S&P Index Committee which are a group of professionals that includes analysts and economists. The list of companies are selected by the following categories: liquidity, industry, and market size.

The included stocks are believed to be some of the most widely traded stocks in the US. Representing 70% of US stock value, the S&P 500 is known as the best representation of the US market however it is also the disadvantage of the index. Because of the dominance of local companies, it offers few foreign investments.

The S&P 500 belongs under the Standard & Poor’s company’s umbrella of S&P Indices across the globe. The company is known as the top index provider in the world and the leading supplier of independent credit ratings for financial markets. In the S&P 500 alone, an impressive $5 trillion is indexed for the year 2012. The company extends its offices to 23 countries with a variety of its indices leading the markets across the world.

Investors and traders alike have been long-time patrons of the S&P 500 as proven by its ongoing success among the indices of the world.