The S&P 500 index is designed to represent 500 leading U.S. companies. Its name refers to the number of companies, not a market-cap ranking or the number of shares traded.
The index was introduced in its modern form by Standard & Poor’s in 1957 and is maintained by S&P Dow Jones Indices. Companies are selected by an index committee using criteria such as market capitalization, liquidity, public float, domicile, and sector representation. The index is weighted by free-float market capitalization, so larger companies have a greater effect on its performance.
A common mix-up is that the index can contain more than 500 stocks. Some companies issue multiple share classes, so the index may have about 503 constituent securities while still representing 500 companies. The S&P 500 is also different from the Dow Jones Industrial Average, which contains 30 companies, and the broader S&P 1500, which combines large-, mid-, and small-cap indexes.