What is the essence of the S&P 500 index, which companies are included, a graph for 20-50 years

The STANDARD & POOR’S 500 Index (S&P 500) is one of the world’s most popular and well-known stock indices. It can be put on a par with the Dow Jones index. On October 29, 2021, the index reached its all-time high, so its prospects are quite good.

What is the S&P 500

The abbreviation “S&P 500” refers to the stock market index. At this point in time, he tracks the stocks of 500 US companies. All of them are distinguished by a large degree of capitalization. Thanks to the SP500, you can track the performance of the stock market. It will also report on the risks and returns of the largest companies. The index is often used by investors as a benchmark for the entire market. It is compared with all other types of investments. As of 2021, the index has an average return of around 13% per year. In October of this year, it reached its historical maximum. At this time, the value of the intraday high and the maximum close was 4,608.08.

The very concept of an exchange or stock index means an indicator with which investors can determine the overall price dynamics simultaneously for the entire group of shares or other types of assets. In other words, several stocks are taken into account at once, for example, all companies in a single country, whose prices are added up. The latter, in turn, are multiplied by specially selected coefficients. The numerical value of the index, if we take a separate period of time, does not carry any useful information. Investors monitor how the price indicator for the entire group of assets changes over a certain time period. The standard period is 10 years. If the index continues to grow over 10 years, this will be an indicator that the country’s economy is in good condition. The shares of companies have stable prospects, and, accordingly, their purchase will bring a good profit to a person in the future. The S&P 500 index contains the names of the two founding financial companies. This is Standard and Poor. It was officially introduced on March 4, 1957. In 1966, it is acquired by McGraw-Hill. After that, the index was acquired several times by other organizations. It is now owned by the Dow Jones owner’s company.

Do not forget that at the time of reading the article, the data in the table may already have changed. The share of companies in the index is recalculated, as already mentioned, every quarter of the year. It should also be taken into account that the total weight of the company in the index is distributed somewhat unevenly. For example, the top 10 companies account for only 25% of the total weight. The next 15 organizations on the list will occupy almost a third of the total volume. The share of companies that are in the TOP-50 will be approximately 50%. The weight of companies that are at the bottom of the index list, i.e. occupies from 400 to 500 places, will be quite insignificant. On average, this is from 0.01 to 0.05%. Those. If we compare these figures with the table, it turns out that

How the S&P 500 works

The S&P 500 carefully monitors the market capitalization of the companies that make up the index. The term “market capitalization” here refers to the total value of the shares that are issued by the company. It is easy to calculate it. It is enough to multiply the number of shares that the company issues by their number. For example, if an organization has a market capitalization of $100 billion, it will earn 10 times the profits of a company with a market capitalization of $10 billion.

As of 2021, the total market capitalization of the S&P 500 is about $27.5 trillion.

It should not be forgotten that the index only measures public stocks. It does not take into account those securities that belong to control groups, other companies or government agencies. To be included in the index, a company must be located in the United States of America and have a market capitalization of at least $8.2 billion. At the same time, at least 50% of its shares must be available to the general public. Securities must sell for at least $1 each. The last four quarters before entering the index, the organization must have only positive profits. At the same time, analysts are required to confirm that, according to forecasts, this trend should continue over the next several years. According to 2021 data, the breakdown by sector of the S&P 500 included the following values:

• Information technology: 27.5%;
• Healthcare: 14.6%;
• Consumer services: 11.2%;
• Communication services: 10.9%;
• Finance: 9.9%;
• Industry: 7.9%;
• Consumer goods: 7.0%;
• Utilities: 3.1%;
• Real estate: 2.8%;
• Materials: 2.6%;
• Energy: 2.5%.

Graphs and explanations

The index maintains its positive growth trend, even despite the economic crisis caused by the pandemic.

Analysts predict that growth could reach up to 8% over a 12-month horizon. On average, over the entire existence of the S&P 500 and its predecessors, the annual return of the index was + 9.7%
. In the long term, with constant refinancing of dividends, the shares of companies that include the index can bring their owner up to 10% return.

How to make money with the S&P 500

The average citizen of the Russian Federation will not be able to directly invest in the S&P 500. This is due to the policy that the owners of the index strictly adhere to. However, a person can mimic its performance with an index fund. In addition, citizens of the Russian Federation can simply buy shares of companies that are part of the S&P 500. They will also bring good income. Many investors use the S&P 500 as an economic indicator. The fact is that the US economy is distinguished by its stability. Therefore, the companies included in the index, located in the territory of this country, are distinguished by their reliability and prospects. This gives investors confidence in the value of the shares they buy from these organizations. Since the S&P 500 only measures US stocks, investors are advised not to forget about the markets of other countries. In recent years, China and India have good prospects for further development. Perhaps it makes sense to periodically buy securities that are owned by companies located names in this region. Investing for beginners in the S&P 500 index – how to invest in the index SP: https://youtu.be/ZJrL75jL6rM Some analysts suggest that in the future, in a few years, China and India stocks may reach the same position as US stocks. More optimistic forecasters believe that the securities will even manage to outperform them. However, these are all just predictions and assumptions that do not have a solid foundation. However, they should not be ignored. In the next few years, the economic situation in the world may change dramatically.

S&P 500 Trading Strategies

There are dozens of trading strategies associated with this index. Here, traders use the full range of existing methods, from scalping to long-term investments. However, apart from other methods, there is a method that involves the conclusion of transactions aimed at convergence or divergence of the spread between the S&P 500 and other types of indices, or stocks. Formally, this is one of the types of pair trading, which refers to hedging.

Key takeaways from the S&P 500

1. Most investors have long known that owning the S&P 500, or a portion of the stocks it owns, is a good way to diversify your stocks. This is primarily due to the fact that the index currently covers most of the stock market.
2. However, sometimes there is a threat of falling even the most reliable units of the stock market. In this case, traders prefer to open short positions.
3. In the S&P 500, a short position here can be represented in a variety of ways, ranging from selling the S&P 500 ETF to buying put options on the index or selling futures.

What is the S&P 500, how to invest in the SnP 500 index, Warren Buffett’s opinion on the S&P index: https://youtu.be/OFRNvRaguoE money. To do this, you will need to buy shares of organizations that are included in the index. The S&P 500 has good growth prospects, which provides a person who has acquired securities with stability and in the long term an increase in their income from shares.