The S&P 500 is a list of 500 of the biggest and most important public companies in the United States. These companies come from many different industries, so the index gives a good overall picture of how the U.S. economy is doing. It’s managed by a company called S&P Dow Jones Indices, which is part of S&P Global.
Even though it’s called the “S&P 500,” the index actually includes 503 stocks—that’s because a few companies have more than one type of stock listed.
How the S&P 500 Is Calculated
The S&P 500 is market-cap weighted, which means companies with bigger market values have a bigger impact on the index.

👉 What’s a Market Cap?
It’s simple:
Market cap = Stock price × Number of shares
To figure out how much weight a company has in the S&P 500, they divide that company’s market cap by the total market cap of all the companies in the index. So:
Company’s weight = Company’s market cap ÷ Total market cap of the index
This calculation is updated regularly, and you can find the numbers on financial news sites—you don’t have to crunch them yourself.
Other S&P Indexes You Should Know
The S&P 500 is part of a bigger family of indexes:
- S&P MidCap 400 – for medium-sized companies
- S&P SmallCap 600 – for smaller companies
Together, the S&P 500, 400, and 600 make up the S&P Composite 1500, which covers about 90% of the U.S. stock market.

Also Read: What’s the Best Way to Start Investing with $100?
How the S&P 500 Is Built
Only free-floating shares (the ones available to the public) are used to calculate a company’s market cap in the index. If a company issues new shares or merges with another, the numbers get adjusted.

The value of the S&P 500 index is calculated by adding up all the adjusted market caps and dividing by something called the divisor. That divisor is a secret formula the S&P keeps private.
Also, the S&P 500 doesn’t include dividends in its index value. So, if companies pay out cash to shareholders, that’s not reflected in the S&P’s main number.
Why Company Weighting Matters
Knowing a company’s weight in the index helps you understand how much it can move the entire S&P 500. For example:
- A company with a 10% weight will affect the index much more than one with just 2%.
So if a big company like Apple has a great or terrible day in the stock market, it could noticeably move the whole index.
How the S&P 500 Compares to Other Indexes

🆚 S&P 500 vs. Dow Jones (DJIA)
The Dow Jones Industrial Average (DJIA) is another famous U.S. stock market index. It includes just 30 large companies. The big difference? The Dow is price-weighted, meaning companies with higher stock prices have more influence—regardless of size.
In contrast, the S&P 500 is market-cap weighted, which most experts consider more balanced and accurate. That’s why institutional investors (like fund managers) often prefer the S&P 500.
🆚 S&P 500 vs. Nasdaq
The Nasdaq is an electronic stock exchange and has several of its own indexes:
- Nasdaq-100 – Top 100 non-financial companies
- Nasdaq Composite – Over 2,500 stocks
- Nasdaq Global Equity Index – Includes international stocks
- PHLX Semiconductor Index (SOX) – Focuses on chipmakers
Some companies appear in both the S&P 500 and Nasdaq indexes, so there’s overlap.

Also Read: How Do Dividends Work and Who Pays Them?
🆚 S&P 500 vs. Russell Indexes
The Russell indexes are similar in that they’re also market-cap weighted. But there are key differences:
- The S&P chooses companies through a committee
- Russell indexes use a set formula
Also, a single company might appear in both the Russell Growth and Russell Value indexes—but that doesn’t happen in S&P indexes.
🆚 S&P 500 vs. Vanguard 500 Fund
The Vanguard 500 Index Fund is built to copy the S&P 500. It invests in the same companies and in roughly the same proportions. So when the S&P 500 goes up or down, the Vanguard fund usually follows closely.
Some Limitations of the S&P 500
One downside of the S&P 500’s design is that overvalued stocks can distort the index. If a company’s stock price rises a lot (even if it’s not really worth that much), its market cap goes up, and it gains more influence in the index.

This is why some investors prefer equal-weighted indexes, where every company—big or small—has the same impact.
Example: Apple’s Weight in the S&P 500
Let’s look at Apple as an example, using real numbers from May 27, 2025:
- Apple’s stock price: $200.21
- Shares outstanding: 14.99 billion
- Market cap: $2.99 trillion
- Total S&P 500 market cap: $60.57 trillion
To get Apple’s weight in the index:
$2.99 trillion ÷ $60.57 trillion ≈ 4.9%
So if Apple’s stock moves by 1%, it can move the entire index noticeably.

Also Read: What Are the Best Dividend Stocks to Buy in 2025?
Why the S&P 500 Matters
The S&P 500 is one of the most widely followed indexes in the world. It gives a clear snapshot of how large U.S. companies—and the U.S. economy overall—are performing. Whether you’re investing directly in the index or just watching the market, understanding how it works can help you make smarter decisions.