The global stock market remains a fast-growing entity, and one that boasts a cumulative value of $85 trillion. In total, the world’s equity market has since its total capitalisation increased by 320% since 2009, as online and digital trading has become increasingly popular.
Interestingly, the stock market is also home to some popular and insightful indexes such as the S&P 500. Entities of this type offer value outside of stock and share values, especially when tracking the performance of the global economy.
In this article, we’ll explore this in further detail, while appraising the best ways of investing in the S&P 500 in the modern age.
What is the S&P 500?
In simple terms, the S&P 500 (or the Standard & Poor’s 500) is a market cap-weighted index of the 500 largest publicly-traded companies in the US.
Currently, the 10 largest company stocks listed in the S&P 500 (in order of said weighting) are Apple Inc., Microsoft, Amazon.com, Facebook, Tesla, Inc., Alphabet Inc. (class A & C), Berkshire Hathaway, Johnson & Johnson, and JPMorgan Chase & Co.
Of course, this varies on a quarterly basis, while the index doesn’t provide an exact list of the top 500 US firms by market cap simply because there are no other factors given consideration.
However, the index is widely considered to offer the best gauge of large-cap US equities, particularly in terms of their performance and how they continue to contribute to wider economic growth or contraction (we’ll have a little more on this later).
To feature in the S&P 500, a company must be located in the US and boast a minimum market cap of at least $5.3 billion. At least 50% of the company’s stock must also be available to the public, while the published equity price must be $1 per share or more.
Interestingly, the business must also have posted at least four consecutive quarters of positive earnings, which is why the index is such a valuable metric for economic growth.
How to Invest in the S&P 500
There’s no doubt that both economists and investors use the S&P 500 to measure the economic climate in North America, with this index offering genuinely accurate and trustworthy indicators of economic growth and sentiment.
The reason for this is simple; as the S&P 500 boasts incredibly diversified sector coverage and the unique way in which market value is weighted.
The question that remains, of course, is how do you invest in the index? In terms of accessibility, you don’t need a particularly large sum of money, or any kind of corporate or institutional links.
Instead, you simply require a small capital holding and access to an online trading platform such as Tickmill, which affords you flexibility in terms of how you access the index and enables you to trade it via contracts for difference (CFDs).
This negates the need to assume a position in each S&P 500 stock, enabling you to instead speculate on the movement of the index as a whole.
Similarly, you can invest in all the associated stocks with a single purchase via a mutual fund or an exchange-traded fund (ETF), minisming commission fees while optimising potential profitability in the process.