What is the S&P 500?

Imagine an index of three companies worth $600 billion, $300 billion and $100 billion: $1 trillion in total. The largest is 60% of the index, so a 10% rise in its stock lifts the index 6% on its own. The smallest is 10%, so the same 10% rise in it lifts the index 1%. The S&P 500 works the same way with about 500 companies, which is why its largest companies move it most.

If you hold $1,000 in a fund that tracks the S&P 500 and the index rises 2% in a week, your $1,000 is worth about $1,020.

On JagSim, Portfolio shows your return beside the S&P 500 on every plan, so you can measure your own trading against the index. To hold the index itself, you can buy an ETF that tracks it, such as SPY, in whole shares during US market hours.

The S&P 500 is the most-watched measure of large US companies, and the usual benchmark for a US stock portfolio. Comparing your return with it, dividends included, is the fair test of whether your trading added anything over simply holding the market.

Who decides which companies are in the S&P 500?

A committee at S&P Dow Jones Indices, using rules on size, trading, profits and being based in the US. The list changes several times a year.

Is the S&P 500 the whole stock market?

No. It covers large US companies and leaves out smaller ones. The Dow Jones Industrial Average holds 30 companies, and the Nasdaq Composite holds the stocks listed on the Nasdaq exchange.

Can you buy the S&P 500 directly?

No. An index is a list and a calculation. You buy it through an index fund or ETF that holds its companies.

What does it mean to beat the S&P 500?

Your return over a period was higher than the index's. The fair comparison uses the index's total return, with dividends, over the same dates.