S&P 500 Investing

S&P 500 stands for Standard and Poor 500, where a specific index of 500 stocks are chosen with the following criteria: liquidity, market size, and industry grouping.. The S&P index is specifically designed to serve as an indicator of U.S. equities, that would reflect the return/risk qualities of the large cap universe. Basically, it’s the benchmark for the U.S. equity performance.

Some companies always included in the list of the S & P 500 is Microsoft, General Electronic, Pfizer, Citigroup, Wal-Mart, American International Group, and Intel. These companies are usually also the biggest in terms of market share and revenue in the nation, though bigger doesn’t necessarily mean they’re included. To be specific the S & P index chooses companies with the widest range of held stocks.

The companies included in the S&P 500 index are carefully chosen by the S&P Index committee, a group of economists and analysts in S&P’s employment. The S & P index is considered a market value weighted index, where every stock’s weight is proportional to it’s corresponding market value.

Investing in S & P 500 usually involves buying an index fund in a Vanguard fund based on the S & P 500. This is a popular path of investment for a lot of people. There are other choices other than Vanguard, but Vanguard has the edge of having difficult to beat low-expense ratios. Other than Vanguard, there’s also the new Exchange Traded Funds, which occasionally have lower expense rations than Vanguard.

Written by admin on April 1st, 2008 with no comments.
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