One of the oldest and most recognized indices followed by investors, the S&P 500 may be the most followed gauge of the performance of large cap companies in the United States. No foreign entities are allowed, meaning that only those companies domiciled in the U.S. and pass certain tests regarding what percentage of assets and revenues are U.S.-based, can be admitted into the index. Naturally, components must trade on a U.S. exchange, and must file reports with the U.S. Securities and Exchange Commission.
To make the S&P 500 index, a company must also be fairly large in size. The exact threshold has changed over time, but it is safe to assume that any S&P 500 company is going to have a market capitalization of multiple billions of dollars. So these are large cap stocks that are very liquid and easy to buy or sell. Due to the broad importance of the S&P 500 index, any stock that is chosen to enter the S&P 500 immediately gains wide analyst coverage, giving investors a broad range of opinions that can be examined individually or averaged.
The S&P 500 index in its present form saw its inception back on March 4th of the year 1957. The index is the most widely used benchmark by fund managers and individual investors alike to judge their relative investment performance.
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