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Nine Surprising Facts About the S&P 500 Index

Experts note that so far this year, nearly 90% of trading days have seen the stock market bouncing more than 1% up or down. That's like riding a roller coaster designed by MC Escher – up, down, left, right, circling back, over and underneath – constantly.

Warren Buffet famously said investing in low-cost index funds, especially index funds following S&P 500, is best for most people. However, many people don't know the details about how the S&P 500 works.

Yes and no. The S&P 500 index comprises 500 of the largest U.S. companies out of about 6,000 that trade on stock exchanges. In this sense, the S&P 500 doesn't fully represent the U.S. stock market.

Does the S&P 500 Represent the U.S. Stock Market?

Does the S&P 500 Include the 500 Largest U.S. Companies?

No, it doesn't. It comprises 500 of the largest companies, but not all of them. Certain companies excluded from the index are larger than many S&P 500 constituent companies.

Surprisingly, no. There are, in fact, 505 stocks of 500 companies because five companies (e.g., Google) have two classes of common stocks included in the index.

Are There Exactly 500 Component Stocks in the S&P 500?

Does Each Component Stock in the S&P 500 Affect the Index Equally?

Not at all. According to Slickcharts, the current weight of Apple (AAPL), with a market cap of $2.6 trillion, is about 6.9% of the index. The weight of Embecta Corporation (EMBC) is a mere 0.000005%.

According to Inc.com, in 1965, companies lasted an average of 33 years in the index, dropping to 20 years by 1990 and forecast to drop to 14 years by 2026. In fact, fewer than 90 of the original 500 companies are still in the index.

Do S&P 500 Companies Stay in the Index Forever?

Is the S&P 500 Diversified?

The index does comprise shares of 500 companies, but because the index is market-cap weighted, the top 10 companies – 11 stocks since Google has two share classes in the top 10 – account for nearly 29% of the index.

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