S&P 500 Facts: 10 Things You Don’t Know
The S&P 500 is one of the most recognizable stock market indices. While the Dow Jones 30 Industrial Average is better known to the public, the S&P is often viewed as the best indicator for large-cap U.S stocks. But… we bet you didn’t know these 10 things about the S&P 500… starting with…The S&P 500 Has 505 Stocks! *all the facts here are true as of July 9, 2021 S&P itself says “the index includes 500 leading companies and covers approximately 80% of available market capitalization.” However, though there are 500 companies in the S&P 500, there are actually 505 stocks in the index!This is because the following 5 companies have dual share classes, giving the S&P 500 5 additional tickers:1Alphabet (which you know as Google): GOOG & GOOGL2Discovery: DISCA & DISCK3Fox Corporation: FOX & FOXA4News Corp: NWS & NWSA5Under Armour: UA & UAA WHAT? There are 505 stocks in the S&P 500 Index $SPX $SPY –> Click to Tweet The S&P 500 Has Made People a LOT of Money… Even With the Ups and DownsHere’s a long-term chart going back to 1980:The S&P 500 has made people a lot of money over the long run. The index has averaged a return of around +10% per year throughout its history, meaning it doubles about every 7 years on average. However, there have been plenty of ups and downs along the way. We’re sure you remember 2008, when the index fell fell over 37% due to the financial crisis. When Congress rejected the bank bailout on September 29 of that year, the S&P 500 dropped -8.8% in a single day of trading. This was the biggest drop since the 1987 Black Monday crash, when the S&P collapsed -20.5%. There’s also been good times, like 2013, when it rose 32.4%. And even with the COVID-19 pandemic, the S&P 500 rose 15.8% in 2020.You Can’t Trade the S&P 500Since the S&P 500 is an index, you can’t directly invest in it or trade it. So how can people make money from it? Simple — they own or trade mutual funds and ETFs indexed to the S&P 500. This means those mutual funds and ETFs model the S&P 500, buying and selling the same stocks in the same weightings to produce a return that’s roughly equivalent to the index itself. S&P says $11.2 trillion in assets (like mutual funds and ETFs) are benchmarked to the index. The best known of these assets are:The SPDR S&P 500 Trust ETF, which trades under the ticker SPYThe Vanguard 500 Index Mutual Fund, which trades under the ticker VFINXHowever, you can trade futures and options based on the S&P 500.S&P Is Actually a Company, and the Index Has a Long HistoryLet’s talk some S&P 500 history and basics. S&P stands for Standard and Poor’s, which is now part of S&P Global Inc, which is now publicly traded under the ticker SPGI. The S&P 500 was founded on March 4, 1957. However, the S&P does have a predecessor index called the Composite Index, which contained 90 stocks. Many historical data sources will mix the two together.The S&P 500’s Ticker Is NOT Always SPXWhile traders often use SPX as a shorthand for the S&P 500 Index, the index’ ticker is NOT always SPX in trading platforms and charting systems. The official ticker is ^GSPC — which is odd because people don’t use it in the real world. On platforms like Twitter and Stocktwits, traders will use $SPX when discussing the index. Charting platforms like Trendspider also typically use $SPX:To add to the confusion: there is actually an infrastucture company called SPX Corporation which used to trade under the ticker SPX. Thankfully, SPX Corporation has since changed its ticker to SPXC.The S&P 500 Does Not Let Every Big Company In, and There’s a Revolving DoorThe S&P 500 is not open to every large publicly-traded corporation. Tesla (TSLA) was only added in December 2020 when it had a $600 billion market cap! Here are the official requirements:Must have a $13.1 Billion Market CapMajority of shares are in the public’s handsMust be highly liquidTraded on a major U.S stock exchangePublicly traded for at least one yearHere are some major companies which are NOT included in the S&P 500:Berkshire Hathaway Class A (BRK.A): $638 Billion Market CapZoom Video Communications (ZM): $113.2 Billion Market CapSquare Inc (SQ): $106.2 BillionSnap Inc (SNAP): $102.9 BillionModerna Inc (MRNA): $93.7 BillionAnd as you might imagine, when a new stock is added, an older one is removed. Companies are removed for all sorts of reasons, including mergers, banktrupcies, or simply falling down the totem pole in terms of size and prestige.The S&P 500 Is a Market Cap Weighted IndexNot every stock in the S&P 500 impacts the index equally. Apple (AAPL) is the top weighted stock and makes up 6.1% of the index. That means 6.1% of the S&P 500’s movements are dictated by Apple. Just below, you’ll see that the top 10 companies in the S&P account for 28% of the index. So it’s quite top heavy. And at the bottom, there is News Corporation Class B (NWS) at just 0.008% of the index.April Is the Best Month for the S&P 500April is the best month of the year for the S&P 500, based on data going back to 1980. The S&P 500 rises 2.0% in April on average, higher than any month. You can see all the data here: S&P 500 Returns By Month Since 1980 Month of the YearAverage SPX Return % Positive MonthsJanuary 1.0% 60% February 0.2% 62% March 0.8% 62% April 2.0% 74% May 0.9% 69% June 0.3% 62% July 1.0% 52% August 0.2% 60% September -0.7% 48% October 1.2% 64% November 1.8% 71% December 1.3% 73% Data Source: Investing.com The S&P 500 has been up in 31 of the 42 last Aprils, or 74%. That is the highest percentage of all months. September is the worst month for the S&P 500, averaging a -0.7% decline since 1980. In fact, September is the only month that is down on average for the S&P 500.The S&P 500’s Top Names Are Ones You KnowSince the S&P 500 is a market cap weighted index, the names in the
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