ELI5: s&p 500

// eli5

What is the S&P 500?

The S&P 500 is like a report card for the biggest American companies [1][3]. Imagine you pick 500 of the most successful businesses in the United States—companies like Apple, Microsoft, and Nike—and you track how well they're all doing together [4]. That's basically what the S&P 500 does.

Why is it important?

It's important because when people want to know how the US economy is doing, they look at the S&P 500 [1]. If the S&P 500 goes up, it usually means big American companies are making more money and doing well [3]. If it goes down, it means companies aren't doing as great.

What does it measure?

The S&P 500 covers about 80% of all the big company stocks in America [1]. So when you hear people talking about "the stock market," they're often really talking about the S&P 500 because it shows what most of the biggest businesses are worth [3].

Why should you care?

If you invest in the S&P 500, you're basically betting that these 500 big American companies will do well over time [5]. Many people think it's a smart way to invest because you're not putting all your money in just one company—you're spreading it across 500 different ones [1].