Course 104: Understanding Market Indexes
The S&P 500
In this course
1 The Dow
2 Calculating the Dow
3 The S&P 500
4 The S&P 500, Part 2
5 Other Indexes

The Dow Jones Industrial Average usually gets most of the attention, but the S&P 500 Index is much more important to the investment world. Index funds that track the S&P 500 hold hundreds of billions of dollars, and thousands of fund managers and other financial professionals track their performance against this ubiquitous index. But what exactly is the S&P 500, anyway?

First of all, a little historical background. The Standard & Poor's 500 as we know it today came into being on March 4, 1957. The makers of that first index retroactively figured its value going back to 1926, and they decided to use an arbitrary base value of 10 for the average value of the index during the years 1941 through 1943. This meant that in 1957 the index stood at about 45, which was also the average price of a share of stock. The companies in the original S&P 500 accounted for about 90% of the value of the U.S. stock market, but this percentage has shrunk to about 75% today as the number of stocks being traded has expanded.

Next: The S&P 500, Part 2 >>

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