The S&P 500 index was compiled by Standard & Poor's in 1957. It was originally made up of 425 industrial stocks, 15 railroad stocks, and 60 utility stocks, known as the S&P 500 .
The S&P 500 uses a "market cap weighting" method, based on the free-floating market value of its components, with a quarterly adjustment system to ensure that the index covers as many of the most liquid and valuable companies in the market as possible.
In terms of constituent stocks, the constituent stocks of the S&P 500 index contain more diversified enterprises and industries, which can better reflect the overall changes of the market. United Airlines, Carnival Corporation, etc., are the representatives of the S&P 500 Index.
Therefore, in the US stock market, the S&P 500 is widely regarded as the best measure of the US economy among the three major indexes.
The S&P 500 is also used by many funds as a performance comparison because of its wealth of stocks and the way it is compiled. In short, if you want a more comprehensive and objective view of what's going on in US stocks, the S&P 500 is a good indicator of which way the wind is blowing.
The Standard 500 Index, Nasdaq Index and Dow Jones Industrial Average are known as the three major indexes of the American stock market. (Tiger trade app - Quotes)
Note that behind the S&P 500 is the S&P Midcap 400, which represents midcap companies, and the S&P Small 600, which represents smaller companies.
For more on the three major US stock indexes, Click here: US stock market investing for beginners
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