Most people have heard of the term “S&P 500” before. But do you really know what it means? Today we’ll break it down, and show why you should be interested in it for yourself.
Note: We at A Step Above Style are not financial advisors. None of the below information should be taken as official financial advice, but rather used for educational purposes only.
Let’s begin.
What is the S&P 500?
The S&P 500 is a index fund that represents about 500 of the United States companies.
Because it is made up of the best of the best, it’s traditionally viewed as a indicator of how the stock market is doing overall.
Some examples of companies within the S&P 500 include :
- Apple
- Microsoft
- Alphabet (Google)
- Amazon
- Berkshire Hathaway (Warren Buffet’s company)
Criteria For Being Listed In The S&P 500
Not just any company can be a part of the prestigious S&P 500. There is a strict criteria that includes but is not limited to the following :
- Must be U.S. based
- Must be structured as a corporation
- Must have a market capitalization (total value of company’s outstanding shares) of at least $8.2 billion
Only the country’s largest, most stable companies are included in the S&P 500. Additionally, the list is reviewed and updated quarterly.
Note: The S&P 500 is a index not a stock. While you can’t buy it as a stock, you can still invest in the S&P 500. Here’s how :
- Buy individual stocks within the S&P 500 such as those listed above
- Buy ETF’s that track the S&P 500 such as VOO (Vanguard) or SPY
Why This Matters To You
Investing in the S&P 500 is suggested to many beginner investors for a reason that’s already been addressed in this blog post.
It is a representation of how the overall U.S. economy is doing.
For this reason not only do beginners invest in the S&P 500, but so do veteran or long time investors.
In fact, some seasoned investors only invest in the S&P 500. Their logic behind this is :
“I believe the U.S. economy will be better over the long term, so it makes sense for me to invest in the S&P 500 today”.
Conclusion
Hopefully you have found this post insightful and informative.
While none of this information should be considered official financial advice, we believe it can benefit our readers and build even more financial literacy.
If you haven’t begun investing yet, perhaps give the S&P 500 a look and start there.
Investing is a great way to put your money to work!
Until next time, yall have a good one.
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