What is the S&P 500?

The S&P 500 is a stock market index of 500 large companies listed in the United States, published by S&P Dow Jones Indices. It covers roughly 80% of the value of the US stock market and is the most widely followed indicator of how "the market" is doing. Many investors use it as a benchmark, and some of the largest funds in the world track it.

Companies are chosen by a committee according to rules on size, liquidity, profitability and the share of stock available for trading, so the S&P 500 is not simply the 500 largest US companies — although it comes close.

How it is calculated

The S&P 500 is weighted by free-float market capitalization. The index level is the total free-float market value of its companies divided by a divisor, which keeps the index continuous when companies are added, removed or issue new shares:

\text{Index level} = \frac{\sum_i P_i \times Q_i}{\text{Divisor}}

where $P_i$ is the share price and $Q_i$ the number of freely tradable shares of company $i$ .

What it contains

Sectors: information technology is by far the largest, at around a third in recent years, followed by financials, health care, consumer discretionary and communication services.
Concentration: the ten largest companies have made up more than a third of the index in the mid-2020s.
International business: although all its companies are American, a large part of their revenues — often estimated at around 40% — comes from outside the United States.

A simple illustration

The headline S&P 500 level is a price index, without dividends. In a year in which the index level rises 8% and its companies pay a dividend yield of 1.5%, the total return with reinvested dividends is about:

R_{\text{total}} \approx 8\% + 1.5\% = 9.5\%

Performance comparisons should use the total return version, as for any fund.

What euro investors should keep in mind

Currency. The S&P 500 is priced in US dollars. For a euro investor, a stronger euro reduces the return and a weaker euro increases it — sometimes by more than the stock market's own move.
Concentration. It is one country, and increasingly a handful of technology companies: a narrower bet than a world index, even though the MSCI World itself is around 70% US.
A fair benchmark only for US stocks. Comparing a global or European portfolio with the S&P 500 measures the difference between markets, not the quality of the portfolio.

A worked example

Worked through on a sample portfolio. The figures below are that portfolio’s, not yours.

How does my portfolio compare to the S&P 500?

Here's how Floreo compares your portfolio to the S&P 500 for 2019-03-01 to 2026-09-11.

Item	Return (%)	Time-weighted (%)	Money-weighted IRR (%)
Your portfolio	+94.61	+153,92%	+13,21%
Invesco S&P 500 UCITS ETF Acc	+199.87	—	—

This shows your portfolio's total, time-weighted and money-weighted returns alongside the S&P 500 total return for the same period.

See these numbers for your own portfolio

Floreo works out every figure on this page from your own holdings — returns, risk, allocation, currencies — and the assistant explains them the way this page does. Import from your broker, or try it on the sample portfolio first.

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