What is the Content of the S&P 500 Index?
The S&P 500 index is a stock market index of the 500 largest companies in the United States. This index is considered an indicator that reflects the general state of the US economy. The content of the S&P 500 index is determined by a rating agency called Standard & Poor's. This organization looks at the following criteria when selecting companies to be included in the index:
- Market value: It is the total value of the company in the stock market. In order to enter the index, it is necessary to have a market value of at least 13.3 billion dollars.
- Liquidity: How easily the stocks of the company can be bought and sold. In order to be included in the index, the average daily trading volume must be at least 1 million dollars.
- Sector diversity: The index should include companies from different sectors in order to represent the economy. Therefore, a certain percentage of companies from each sector are included in the index.
- Financial soundness: Financial indicators such as profitability, indebtedness and growth of the company are also important for inclusion in the index. Most of the companies included in the index are those that are profitable and have a stable performance.
The content of the S&P 500 index is reviewed quarterly and changed as needed. Companies excluded from the index are replaced by new companies. Thus, the index has a current and dynamic structure. The S&P 500 index is used as an easy way for investors to follow both the US economy and the stock market.