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Who uses the S&P 500 index?

A:

Quick Answer

The Standard & Poor's 500 stock market index is used by individual investors, economists and financial firms to assess the status of the United States stock market and economy. The S&P 500 is also used to inform investing strategies for investment vehicles known as index funds.

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Full Answer

The S&P 500 indexes 500 stock prices from companies thought to represent major players in all sectors of the economy in a scheme originally created by credit rating agency Standard & Poor's. The S&P 500 includes more firms than the more famous Dow Jones index and a wider breadth of industries, so many investors and economists feel it provides a more complete picture of the overall health of the stock market and economy than the Dow Jones. Interestingly, both the S&P 500 and Dow Jones index are currently maintained by the same corporation.

The S&P 500 is also the basis of one of the most famous index fund investment vehicles, the Vanguard S&P 500 fund. Index funds are investment funds that manage the composition of the stocks that the fund holds based on the valuation of the stocks in a particular stock market index. Though index funds using many different market indices are commonly available to current investors, the Vanguard S&P 500 fund popularized the investment technique by being the first such fund available to individual investors.

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