What companies are in the S&P 500 index?
The S&P 500 index is composed of 505 stocks issued by 500 different companies. There’s a difference in numbers here because a few S&P 500 component companies issue more than one class of stock -- for example, Alphabet Class C (NASDAQ:GOOG) and Alphabet Class A (NASDAQ:GOOGL) are both included in the S&P 500 index.
Obviously, it wouldn’t be practical to list all of the S&P 500 components here. However, because the S&P 500 is a market cap-weighted index, its performance is mostly dependent on the largest stocks it contains.
With that in mind, here’s a look at the 10 largest components of the S&P 500 index as of February 2020, although it's important to keep in mind that the order can (and probably will) change over time:
- Microsoft (NASDAQ:MSFT)
- Apple (NASDAQ:AAPL)
- Amazon (NASDAQ:AMZN)
- Facebook (NASDAQ:FB)
- Berkshire Hathaway Class B (NYSE:BRK.B)
- Alphabet Class C (NASDAQ:GOOG)
- Alphabet Class A (NASDAQ:GOOGL)
- JPMorgan Chase (NYSE:JPM)
- Johnson & Johnson (NYSE:JNJ)
- Visa (NYSE:V)
Data source: Dow Jones S&P Indices.
Why is the S&P 500 index considered the best snapshot of the stock market?
In short, the S&P 500 consists of a broad basket of stocks without too many small and obscure companies. It contains the companies widely owned by individual investors, with the 500 components accounting for roughly 80% of the overall stock market capitalization in the United States.
The S&P 500 versus the Dow Jones Industrial Average
One common question is why the S&P 500 is considered by most experts to be a better stock market indicator than the Dow Jones Industrial Average. After all, the Dow's value is typically the headline number you see on TV.
However, the Dow has two big shortcomings. For one thing, it includes only 30 companies, and it leaves off some of the largest stocks in the market -- for example, top-10 S&P 500 stocks Amazon, Alphabet, and Berkshire Hathaway are all notably absent from the Dow.
Second, and most importantly, the Dow Jones Industrial Average is a price-weighted index. This means that companies with higher stock prices have more of an influence on the index than those with lower per-share prices, even if they are much smaller companies. As an example, Goldman Sachs (NYSE:GS), with a $238 share price currently, has more than twice as much weight in the Dow as Walmart (NYSE:WMT), despite being just one-fourth of the size by market cap.
In short, the S&P 500 covers far more stocks than the Dow, and it does so with a weighting that makes far more sense for trying to gauge the overall stock market's performance.