The S&P 500
The Standard and Poor's 500 (a.k.a. the S&P 500) is a stock market index. Created by a publishing company called (not surprisingly) Standard & Poor's, the S&P 500 tracks the top 500 U.S. companies by market value across nine industries:
- Consumer Discretionary
- Consumer Staples
- Health Care
- Information Technology
- Telecommunication Services
If you ever want a sneak peek at how the economy is doing, the S&P 500 gives you a quick snapshot. In fact, lots of mutual fund managers are looking at the S&P 500 (and trying to beat it) when they choose investments for your fund. So you can measure how your mutual fund is doing by checking out the S&P 500.
Just one thing: while this index is important, you shouldn't lose sleep over it. The top 50 companies in this index account for about 50% of the S&P 500s value. So if a few of those companies do really well (or really badly) it can throw the whole index out of whack. And there are other indicators about how well the economy is doing—like whether or not you and your friends can land jobs.
Of course, there's no one number that measures the U.S. economy—but Wall Street thinks the S&P 500 comes close.