The S&P 500 consists of 500 companies that have issued a total of 503 stocks. Some companies, such as Alphabet, have issued multiple classes of shares. The top 10 largest holdings are listed on the official S&P Global website. An S&P 500 company must meet specific requirements to be included as a constituent within the index.
However, S&P does not currently provide the total list of holdings, at least not for free. Subscribers to S&P's research unit, Capital IQ, can get access to the entire list. companies represent the top companies within their industries and are a gauge of U.S. economic activity.
Key Takeaways
- The S&P 500 includes some of the top companies that are leaders within their industries and represent a gauge of the U.S. economy.
- Companies must meet certain requirement criteria, which are determined by the publishers of the index before being added to the S&P.
- The S&P 500 index is market capitalization-weighted, where it gives a higher percentage allocation to companies with the largest market cap.
- A stock must meet certain criteria, including a total market cap of $14.5 billion, to join the S&P 500.
- Companies may be removed from the S&P 500 if they deviate substantially from these standards.
S&P 500 Inclusion Criteria
The S&P 500 was created in 1957 and is one of the most widely quoted stock market indexes. S&P 500 stocks represent the largest publicly traded companies in the U.S. The S&P 500 focuses on the U.S. market's large-cap sector.
An S&P 500 company must meet a broad set of criteria to be added to the index, including the following:
- A total market capitalization of at least $14.5 billion
- Must be a U.S. company
- A float-adjusted liquidity ratio (FALR) greater than or equal to 0.75
- A positive sum of the most recent four consecutive quarters of trailing earnings
- Positive earnings for its most recent quarter
- Must meet certain liquidity requirements
Companies may be removed from the S&P 500 if they deviate substantially from these standards.
$39.7 Trillion
The total combined market cap of the 503 constituents in the S&P 500 as of Aug. 31, 2023.
S&P 500 Calculation
The S&P 500 is a free-float market capitalization-weighted index. Market capitalization represents the total dollar market value of a company's outstanding equity shares. Market cap is calculated by multiplying the total number of outstanding shares of stock by the company's current stock price. For example, a company with 20 million shares outstanding in which its stock is selling for $100 per share would have a market cap of $2 billion.
As a result, the more valuable an individual company's stock becomes, the more it contributes to the S&P 500's overall return. It is not uncommon for three-quarters of the index's return to be linked to only 50 to 75 stocks.
Therefore, the addition or subtraction of smaller companies from the index will not have a noticeable impact on the overall return of the index; however, the removal or addition of even just one of the largest stocks can have a major impact.
S&P 500 Sector Breakdown
Below are the top sectors and their weightings within the S&P 500 index as of Aug. 31, 2023.
| S&P 500 Sector Weighting | |
|---|---|
| Sector | Index Weighting |
| Information Technology | 28.2% |
| Healthcare | 13.2% |
| Financials | 12.5% |
| Consumer Discretionary | 10.6% |
| Communication Services | 8.8% |
| Industrials | 8.4% |
| Consumer Staples | 6.6% |
| Energy | 4.4% |
| Materials | 2.5% |
| Real Estate | 2.4% |
| Utilities | 2.4% |
Being aware of the S&P's sector weighting is important because sectors with a smaller weighting may not have a material impact on the value of the overall index even if they're outperforming or underperforming the market.
For example, if oil prices are rising, leading to increased profits for the energy sector, those stocks represent only 4.4% of the S&P 500. As a result, oil stocks may not lead to a higher S&P if, for example, the more heavily weighted information technology sector is underperforming.
S&P 500 components are weighted by free-float market capitalization, which means that larger companies can affect the value of the index to a greater degree.
Top 25 Components by Market Cap
Because the exact weightings of the top 25 components are not available from S&P directly, the weightings below are from the (SPY). SPY is the oldest exchange-traded fund (ETF) that tracks the S&P 500 and holds $406.6 billion in assets under management (AUM) as of Sept. 20, 2023, and is highly traded.
As a result, the SPY's portfolio weightings provide a good proxy for investing in the underlying S&P 500 index, although the two may not be exactly the same. As of Sept. 21, 2023, the following are the 25 largest S&P 500 index constituents by weight:
- Apple (AAPL): 7.05%
- Microsoft (MSFT): 6.54%
- Amazon (AMZN): 3.24%
- NVIDIA (NVDA): 2.79%
- Alphabet Class A (GOOGL): 2.13%
- Tesla (TSLA): 1.95%
- Alphabet Class C (GOOG): 1.83%
- Berkshire Hathaway (BRK.B): 1.83%
- Meta (META), formerly Facebook, Class A: 1.81%
- UnitedHealth Group (UNH): 1.28%
- Exxon Mobil (XOM): 1.27%
- Eli Lilly (LLY): 1.21%
- JPMorgan Chase (JPM): 1.18%
- Johnson & Johnson (JNJ): 1.07%
- Visa Class A (V): 1.05%
- Procter & Gamble (PG): 0.99%
- Mastercard Class A (MA): 0.93%
- Broadcom (AVGO): 0.92%
- Home Depot (HD): 0.85%
- Chevron Corporation (CVX): 0.81%
- Merck (MRK): 0.75%
- AbbVie (ABBV): 0.75%
- Costco (COST): 0.67%
- PepsiCo (PEP): 0.67%
- Adobe (ADBE): 0.65%
How Many Companies Are in the S&P 500?
Although there are generally 500 companies within the index, that number has grown. There were 503 stocks that made up the S&P 500 as of Aug. 31, 2023. That's because some companies have multiple classes of equity shares, such as Alphabet.
How Are Companies Selected for the S&P 500?
A company must meet certain requirements for inclusion in the S&P 500, which include:
- A market cap of at least $14.5 billion
- Must be a U.S. company
- A float-adjusted liquidity ratio (FALR) greater than or equal to 0.75
- Positive earnings over the most recent four consecutive quarters summed together
- A profitable earnings report for the company's most recent quarter
- Liquidity requirements
How to Buy the S&P 500?
Since the S&P 500 is an index, it can not be purchased directly; however, exchange-traded funds that mirror or track the index can be purchased, such as the State Street Global Advisors' SPDR S&P 500 Trust ETF (SPY).
The Bottom Line
The top 25 companies in the S&P 500 are some of the most well-known companies in the world, a large portion of the top 10 being tech companies, such as Apple, Microsoft, and Google. To invest in the companies in the index, investors can purchase the individual stocks of the companies or invest in a fund that tracks the S&P 500.
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Article Sources
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As an expert in financial markets and investment strategies, I bring a wealth of knowledge and experience to the table. My understanding of the intricacies of market indices, particularly the S&P 500, is rooted in years of studying market dynamics, analyzing economic trends, and staying abreast of the latest developments in the financial world.
Now, let's delve into the concepts covered in the article about the S&P 500:
-
S&P 500 Composition:
- The S&P 500 consists of 500 companies, totaling 503 stocks due to some companies issuing multiple classes of shares.
- Top 10 holdings can be found on the official S&P Global website.
- Companies must meet specific requirements to be included in the index.
-
S&P 500 Inclusion Criteria:
- Criteria for inclusion include a total market capitalization of at least $14.5 billion, U.S. company status, float-adjusted liquidity ratio (FALR) greater than or equal to 0.75, positive earnings over the most recent four consecutive quarters, and positive earnings for the most recent quarter.
-
S&P 500 Calculation:
- The index is market capitalization-weighted, meaning companies with larger market caps have a higher percentage allocation.
- Market cap is calculated by multiplying a company's outstanding shares by its current stock price.
- The overall return of the S&P 500 is significantly influenced by a small number of large-cap stocks.
-
S&P 500 Sector Breakdown:
- Sectors and their weightings as of Aug. 31, 2023: Information Technology (28.2%), Healthcare (13.2%), Financials (12.5%), Consumer Discretionary (10.6%), Communication Services (8.8%), Industrials (8.4%), Consumer Staples (6.6%), Energy (4.4%), Materials (2.5%), Real Estate (2.4%), Utilities (2.4%).
- Sector weightings are crucial as they impact the overall index value.
-
Top 25 Components by Market Cap:
- The weightings of the top 25 components are not directly available from S&P but can be approximated using proxies like the SPDR S&P 500 Trust ETF (SPY).
- As of Sept. 21, 2023, the top 10 components include Apple, Microsoft, Amazon, NVIDIA, Alphabet Class A, Tesla, Alphabet Class C, Berkshire Hathaway, Meta, and UnitedHealth Group.
-
Number of Companies and Growth:
- As of Aug. 31, 2023, there were 503 stocks in the S&P 500 due to companies with multiple classes of equity shares.
-
How to Buy the S&P 500:
- The S&P 500 itself cannot be purchased directly, but investors can buy exchange-traded funds (ETFs) that mirror or track the index, such as the SPDR S&P 500 Trust ETF (SPY).
In conclusion, the S&P 500 is a key indicator of the U.S. economy, comprising top companies from various sectors. Its composition, calculation methodology, sector breakdown, and top components play crucial roles in understanding and investing in this prominent market index.
