What Is the S&P 500?
The S&P 500 index, or Standard & Poor’s 500 index is an index representing 500 of the largest stocks on American equity markets, being the NASDAQ & NYSE. This is one of the most widely used benchmarks of US stock market performance, alongside the Dow Jones Industrial Average. The S&P 500 is market cap weighted, meaning the larger companies have a stronger influence on the price of the index.
History of the S&P 500
The S&P 500 was first introduced in 1957 when it began tracking 500 of the largest public US companies. The S&P is a good measure of US stock market performance—It tracks the performance of the some of the largest US companies such as Apple or Exxon Mobil, while also housing some smaller companies such as TripAdvisor and Harley-Davidson.
S&P 500 Historical Returns
From inception on March the 4th, 1957, until the same day in 2018, the index averaged a CAGR of 6.98%. Not including dividends paid out. At this compounded annual growth rate, $10,000 invested in 1957 would have grown to $612,997 in 2018. This figure would also be larger if you were to include dividends paid out. 4.3% is the average dividend yield for the S&P 500.
To learn more about typical stock market returns, visit my Compound Interest post.
S&P 500 ETF’s
Index funds are a great way to to gain exposure to the American equity markets or diversify your portfolio. I have listed one below.
The Vanguard S&P 500 ETF (VOO) is one of the biggest S&P 500 index funds available for purchase. Since it was founded on the 7th of September 2010, until the time of writing, it has attained an average CAGR of 14.12%. This fund charges a minimal 0.04% fee yearly. Meaning you will be able to track the index, while avoiding the heavy expenses generally associated with owning actively managed funds.
For more info on US stock market indexes, visit the What is the Dow? post here.