What are stock market indexes?

An index collects data from a variety of companies across industries. Together, that data forms a picture that helps investors compare current price levels with past prices to calculate market performance. Some indexes focus on a smaller subset of the market. For example, the Nasdaq index has a high concentration of technology stocks. So, if you want to know how technology is performing, you’d want to look at the Nasdaq stock index.

What is the 10-year return of the S&P 500?

For the 10-year period through the end of 2025, the S&P 500 produced a 15.5% annualized total returns. This represents a cumulative return of approximately 323%, which is above the long-term historical average return of around 9% to 10% per year.

How long should I keep my money in the S&P 500?

There's no perfect holding period for an S&P 500 index fund, but the index is ideal for use as a long-term investment. Many people buy S&P 500 index funds and hold them for decades. However, as you get older, it's often time to gradually shift money away from stocks and into fixed-income investments, like bonds, to reduce volatility and create an income stream.

What is the Nasdaq Composite Index?

The Nasdaq Composite is a stock market index comprising the stocks listed on the Nasdaq stock exchange. To be included in the index:A stock must be listed exclusively on the Nasdaq market.The stock must be a common stock of an individual company, so preferred stocks, ETFs, and other types of securities are excluded.American depositary receipts (ADRs), real estate investment trusts (REITs), and shares of limited partnerships are eligible, however.That's why there are so many stocks included in the Nasdaq Composite and why the number of stocks in the index often changes. The index is designed to be representative of the entire Nasdaq Stock Market, not just the largest companies.

Are there fees associated with investing in S&P 500 ETFs or mutual funds?

All S&P 500 ETFs and mutual funds have fees, which are referred to as the expense ratio in investor documents. These are expressed as a percentage of the total fund assets per year, so a 0.03% expense ratio means you'll pay $3 in fees for every $10,000 you invest. To be clear, this isn't a fee you have to actually pay -- it will simply be reflected in the fund's performance over time.

Does the S&P 500 pay dividends?

Many of the 500 companies included in the S&P 500 index pay dividends to shareholders. S&P 500 index funds pass these through to investors in the form of dividend payments at regular intervals.

S&P 500 Index Explained: What It Is and How to Invest

S&P 500 Explained: How the Index Works and How to Invest in It

By Matthew Frankel, CFP – Updated Feb 12, 2026 at 5:03 PM EST | Fact-checked by Frank Bass

Key Points

S&P 500 is a key stock index reflecting the performance of 500 large U.S. companies.
Invest in S&P 500 via low-cost ETFs or mutual funds for broad market exposure.
S&P 500's market-cap weighting means top firms significantly impact its performance.

When it comes to the major U.S. stock indexes, the S&P 500 index is considered the best gauge of the overall stock market's performance and an indicator of how large U.S. corporations are performing.

With that in mind, here’s what all investors should know about the S&P 500 index, how it works, how you can invest in it, and why doing so could be a smart move.

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S&P 500 listed repeatedly. — Image source: Getty Images.

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Which companies are in the S&P 500 index?

The S&P 500 index is composed of 503 stocks issued by 500 different companies. There's a difference in numbers because a few S&P 500 component companies issue more than one class of stock. For example, Alphabet Class C (GOOG +1.39%) and Alphabet Class A (GOOGL +1.50%) stock are both included in the S&P 500 index.

Obviously, it wouldn't be practical to list all of the S&P 500 companies here. However, because the S&P 500 is weighted by market capitalization, its performance is primarily driven by the performance of the stocks of the largest companies.

With that in mind, here's a look at the 10 largest companies of the S&P 500 index as of October 2025. This list and its sequence can, and probably will, change over time.

Nvidia (NVDA -4.43%)
Apple (AAPL -3.40%)
Microsoft (MSFT -2.17%)
Amazon (AMZN +1.04%)
Alphabet (GOOGL +1.50%) (GOOG +1.39%)
Meta Platforms (META -1.29%)
Broadcom (AVGO -0.67%)
Tesla (TSLA -1.52%)
Berkshire Hathaway (BRK.A +0.50%)(BRK.B +0.45%)
Eli Lilly (LLY +2.76%)

Data source: Dow Jones S&P Indexes.

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S&P 500 FAQ

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About the Author

Matt Frankel, CFP, is a contributing Motley Fool stock market analyst and personal finance expert covering financial stocks, REITs, SPACs, and personal finance. Prior to The Motley Fool, Matt taught high school and college mathematics. He holds a bachelor’s degree in physics from the University of South Carolina, a master’s degree in mathematics from Nova Southeastern University, and a graduate certificate in financial planning from Florida State University. He won a SABEW award for coverage of the 2017 Tax Cuts and Jobs Act. He is also regularly interviewed by Cheddar, The National Desk, and other TV networks and publications for his financial, stock market, and investing expertise.

TMFMattFrankel

@MattFrankelCFP

Matt Frankel, CFP has positions in Amazon, Berkshire Hathaway, General Motors, and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Goldman Sachs Group, Meta Platforms, Microsoft, Nvidia, Tesla, and Vanguard S&P 500 ETF. The Motley Fool recommends Broadcom and General Motors. The Motley Fool has a disclosure policy.

S&P 500 vs. other major indexes

Although the S&P 500 is widely regarded as the best gauge of how the U.S. stock market is doing, there are several other indexes that can be useful for investors as well, including:

Dow Jones Industrial Average

Nasdaq Composite

Russell 2000 (small-cap index)

S&P 500 vs. Dow Jones Industrial Average

The Dow Jones Industrial Average is a price-weighted index, meaning that the companies with the highest stock prices have the most influence on the index, regardless of their valuations. The Dow only lists 30 companies and excludes some of the largest stocks in the market, including Amazon, Alphabet, and Berkshire Hathaway.

Because the Dow is price-weighted, Goldman Sachs (GS -7.63%), with a share price of over $930 in mid-January, has about eight times as much influence over the Dow's performance as Walmart (NYSE:WMT), despite Goldman's market cap being roughly one-fourth of Walmart's.

For these reasons, the S&P 500 is generally regarded by most experts as a more reliable stock market indicator.

S&P 500 versus the Nasdaq

The obvious difference between the S&P 500 and the Nasdaq Composite Index is that stocks in the latter must be listed exclusively on the Nasdaq market. The S&P 500 is a mix of both Nasdaq and New York Stock Exchange (NYSE) stocks.

You may also notice that when tech stocks are underperforming, the Nasdaq Composite tends to underperform the S&P 500 because the Nasdaq has a higher proportion of technology stocks than the broader market, making it a more tech-heavy index.

Another key difference is that while the S&P 500 consists of large-cap stocks, the Nasdaq Composite contains all qualified stocks listed on the Nasdaq exchange, so it's more diverse in terms of market caps represented.

S&P 500 versus the Russell Indexes

The Russell Indexes are designed to provide benchmarks for the entire stock market. The Russell 1000 is the closest comparison to the S&P 500. It's a large-cap stock index comprising 1,000 stocks (twice as many as the S&P 500) and representing approximately 93% of the stock market.

There is also the more popular Russell 2000 index, which is considered the best benchmark of how small-cap U.S. stocks are doing. Collectively, the Russell 1000 and Russell 2000 are known as the Russell 3000, which is a total stock market benchmark index.

S&P 500 Explained: How the Index Works and How to Invest in It

Key Points

Which companies are in the S&P 500 index?

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S&P 500 FAQ

What are stock market indexes?

What is the 10-year return of the S&P 500?

How long should I keep my money in the S&P 500?

What is the Nasdaq Composite Index?

Are there fees associated with investing in S&P 500 ETFs or mutual funds?

Does the S&P 500 pay dividends?

Why use the S&P 500?

Company weighting formula and calculation

Limitations of the S&P 500 index

Is investing in the S&P 500 right for you?

Related investing topics

FAQ

What is the S&P 500 index?

Which companies are in the S&P 500 index?

How can you invest in the S&P 500 index?

S&P 500 vs. other major indexes

S&P 500 vs. Dow Jones Industrial Average

S&P 500 versus the Nasdaq

S&P 500 versus the Russell Indexes