Investing 101
What Is the S&P 500? A Beginner's Guide
What the S&P 500 is, how it's built, why people use it to measure the market, and how beginners can learn from it.
Beginner investing lessons and fake-money practice from the maker of Quoliv.
Quick answer
The S&P 500 is a stock market index that tracks about 500 of the largest companies listed in the US. When people say "the market was up today", they often mean the S&P 500. You can't buy the index itself, but index funds and ETFs try to copy it.
What you’ll learn
- The S&P 500 follows roughly 500 large US companies.
- Bigger companies count for more, because the index is weighted by market cap.
- It's widely used as a scoreboard for how the US stock market is doing.
- You can't invest in the index directly, only in funds that track it.
- It still goes down, sometimes a lot, so it isn't risk-free.
This explanation is part of our ETFs & Funds lessons path, where you can explore the idea in short lessons and quizzes.
What an index actually is
A market index is a list of investments that is used to measure how a part of the market is performing. Instead of checking hundreds of stocks one by one, you can look at one number that summarizes them.
The S&P 500 is one of the best-known indexes. A committee picks the companies based on rules like size, how easily the shares trade, and profitability, and the list changes over time as companies grow or shrink.
Why the biggest companies matter most
The S&P 500 is weighted by market capitalization, which is the total value of a company's shares. A very large company moves the index much more than a small one. That means a handful of giant companies can drive a big part of the index's daily move.
Owning a fund that tracks the S&P 500 spreads your money across many companies, but it still leans heavily on the largest ones.
S&P 500 vs other indexes
| What it tracks | Size | |
|---|---|---|
| S&P 500 | Large US companies across many industries | About 500 companies |
| Dow Jones Industrial Average | Well-known US blue chip companies | 30 companies |
| Nasdaq Composite | Companies listed on the Nasdaq exchange, tech-heavy | Thousands of companies |
Things beginners often get wrong
- Past returns don't promise future returns, even for a famous index.
- The index can fall 20% or more during a bear market.
- Funds that track it charge fees, so compare expense ratios.
- It only covers large US companies, not the whole world or small companies.
Want to see how the index moves without risking anything? Practice with $10,000 in fake money in the Quoliv simulator.
Sources and methodology
This guide was written for education using the primary sources below. It does not evaluate your finances or recommend an investment. Read our editorial policy.