The S&P 500 Index: America's Benchmark Between Breadth and a Heavy Top

In depth10 min read · updated 6 November 2026 · 14 sources

The S&P 500 is the benchmark for the US stock market: 500 large American companies, chosen by a committee and weighted by the market value of their free float. This profile starts with the history of the index, explains the rules including the earnings rule, shows the concentration in a few technology giants, asks how American the revenue really is, and works out how much dividends add. It also compares the index with MSCI USA, which sits inside many world funds. Unless stated otherwise, figures are as of September 30, 2026.

From the Standard Statistics Company to Nvidia at the top

• 1923 and 1926: The Standard Statistics Company calculates a weekly index of 233 companies, and from 1926 a daily index of 90 stocks (S&P DJI, S&P 500 brochure 2025).
• 1957: On March 4, the S&P 500 launches in its current form (S&P DJI, S&P 500 brochure 2025).
• 1970s and 1980s: The first index fund for institutional investors appears in 1973, the first for retail investors in 1976, the first exchange-traded index future in 1982, and index options follow in 1983; the first US ETF follows in 1993 (S&P DJI, S&P 500 brochure 2025).
• 1999 and 2005: S&P and MSCI introduce GICS sectors. In 2005, S&P switches to float-adjusted weighting (S&P DJI, U.S. indices methodology 2026).
• 2007 to 2009: In the financial crisis, the broad US market, measured by MSCI USA, loses 54.91% from October 9, 2007, to March 9, 2009 (MSCI USA factsheet 2026). Overall, S&P Dow Jones Indices counts twelve bear markets since 1957 with an average decline of 33% (S&P DJI, S&P 500 brochure 2025).
• 2025 and 2026: The size threshold rises to $22.7 billion, and the index ends 2025 at 6,845.50 points (S&P DJI, Market Attributes 2026).

The five largest stocks show how the top has shifted. In 1995 they were General Electric, Exxon Mobil, AT&T, Coca-Cola and Royal Dutch Petroleum; in 2005 General Electric, Exxon Mobil, Microsoft, Citigroup and Pfizer. In 2015 Apple, Microsoft, Exxon Mobil, Johnson & Johnson and General Electric led, in 2025 Nvidia, Microsoft, Apple, Amazon and Meta (S&P DJI, S&P 500 brochure 2025). Oil, industrials and banks have dropped out of the top; technology and platforms have taken over.

A committee decides: the S&P 500's entry rules

Sources: methodology and index page of S&P Dow Jones Indices (S&P DJI, U.S. indices methodology 2026; S&P DJI 2025; S&P DJI, S&P 500 brochure 2025).

Unlike most indices, the S&P 500 does not follow a purely mechanical rulebook. The criteria define who is eligible; which company actually joins is decided by the Index Committee. It aims to represent sectors roughly as they appear in the broad US market. The size threshold of $22.7 billion has applied since July 1, 2025; in 2017 it was still $6.1 billion (S&P DJI 2025; S&P DJI, U.S. indices methodology 2026).

Weighting follows the market value of the free float without a cap, so a single stock can become as heavy as the market makes it.

NVIDIA, Apple, Microsoft: ten stocks carry 39%

As of September 30, 2026. S&P 500: holdings of the largest ETF on the index (SPDR S&P 500 factsheet 2026), sum computed by us; MSCI USA: factsheet (MSCI USA factsheet 2026).

Both indices hold the same ten largest stocks with almost the same weights. Counting Alphabet as one company, five firms make up 30.75% of the S&P 500: NVIDIA, Apple, Microsoft, Alphabet and Amazon. The seven large technology stocks, often called the Magnificent 7, made up 34.9% of market value at the end of 2025 and delivered 55% of the total return of the preceding three years (S&P DJI, Market Attributes 2026). According to a study by S&P Dow Jones Indices, the ten largest stocks reached almost 40% of the index in mid-2025, a level not seen since the mid-1960s (Edwards and Didio 2026).

One way to measure this is again the effective number of holdings. From the ten largest weights (sum of squares 204.89 in %²) and the remaining 60.96% spread evenly across 494 securities, the upper bound is 47.08. Counting the two Alphabet share classes together, it is at most 43.96. So the S&P 500 is diversified like at most 44 equally sized companies, even though it holds 500. For MSCI USA with 513 stocks, the bound is 49.49.

Information technology makes up almost 40%. On top come Alphabet and Meta, which GICS counts as communication services, and Amazon and Tesla in consumer discretionary. Energy, utilities, real estate and materials together weigh less than 9%. The S&P 500 is therefore not a picture of the US economy but of its stock market value, and that depends heavily on a few industries.

No profit, no seat: the earnings rule and the wait after an IPO

The most important hurdle for entry is the earnings rule: a company needs positive earnings under US GAAP, the American accounting rules, in the latest quarter and in the sum of the last four quarters (S&P DJI, U.S. indices methodology 2026). Both conditions must hold at the same time. A profitable year with a loss in the latest quarter is therefore not enough, and neither is a single profitable quarter if the four quarters together add up to a loss.

Then there is the waiting period: after an IPO, a stock must have traded for at least twelve months. In June 2026, S&P Dow Jones Indices decided to keep this rule, even for very large newcomers (AP 2026). A young company can therefore already rank among the largest in the US by market value and still be missing from the S&P 500 until it has been listed for a year and reports profits.

Other indices are more generous. MSCI USA selects by fixed rules on size and tradability (MSCI GIMI Methodology 2024) and has no earnings test, so it can also contain companies with losses. The DAX has a similar hurdle but tests EBITDA, earnings before interest, taxes, depreciation and amortization, and requires it to be positive in the two most recent fiscal years (DAX Methodology 2026). At the index level, the filter makes little difference: the composition and return of the S&P 500 and MSCI USA are close.

Revenue abroad: 28% to 43%, depending on the method

All S&P 500 members are US companies, but a large part of their revenue is earned abroad. How large depends on the calculation. S&P Dow Jones Indices counted annually up to fiscal 2018 and arrived at 42.90%. Only companies with a foreign share between 15% and 85% were included; across all companies the figure was 28.25%, because many do not report countries. The author stresses that the figure is not a statement of exact values (Silverblatt 2019). An analysis by Goldman Sachs finds 28% foreign revenue for 2024 (Karaahmetovic 2025).

Different definitions: many companies report only "international" without countries, and each defines its own regions (Silverblatt 2019; Karaahmetovic 2025).

For you as an investor, this means two things. First, the S&P 500 also depends on the world economy, above all through technology and semiconductors, which sell a lot abroad. Second, the valuation and price risk of the US market remains: when American stocks are expensive, a high share of foreign revenue helps little. For a US investor, the index carries no direct currency risk, but its foreign revenue means a weaker dollar tends to lift reported earnings and a stronger dollar to weigh on them (see currency risk).

About 7% without, about 10% with dividends: returns since 1957

The S&P 500 is quoted as a price index, so the familiar point level leaves out dividends. With a dividend yield of 1.10% (SPDR S&P 500 factsheet 2026), this matters less than for the DAX, but it still adds up over the years. Since 1957, according to S&P Dow Jones Indices, the price index returned about 7% per year, about 10% with dividends (S&P DJI, S&P 500 brochure 2025).

Over three and ten years, the two indices are practically level; the differences are 0.02 and 0.03 percentage points per year. Over five years, the S&P 500 is ahead by 0.46 percentage points, mainly because of 2022: it lost 18.11% with dividends, MSCI USA 19.46%. The volatility of MSCI USA was 12.66% per year over three years and 15.59% over ten years (MSCI USA factsheet 2026).

MSCI USA: more stocks, no committee, almost the same return

• Scope: MSCI USA has 513 stocks and covers about 85% of the free float (MSCI USA factsheet 2026); the S&P 500 has a fixed 500 companies and about 80% of the market. The smallest MSCI USA stock is worth $6.18 billion (free float), while a newcomer to the S&P 500 must be worth at least $22.7 billion.
• Selection: MSCI selects by fixed rules on size and tradability and reviews quarterly (MSCI GIMI Methodology 2024). For the S&P 500, a committee decides, and inclusion requires profits.
• What they share: Both weight by free float without a cap, both use GICS, and both hold both Alphabet share classes.
• Consequences: Composition, sectors and returns are so close that the choice between the two hardly matters for a portfolio. What matters more is how closely a fund follows its index (tracking difference) and what withholding tax it pays.

S&P 500 funds for under 0.1% a year, and rebuilding the index from sectors

In the US, the S&P 500 is tracked by some of the largest and cheapest index funds. For investors in Europe, numerous UCITS ETFs exist, mostly measured against the net return index after a flat withholding tax. Ongoing charges of large funds are below 0.1% per year, for a physically replicating UCITS ETF with just over $150 billion in assets 0.07% (iShares Core S&P 500 factsheet 2026). Funds domiciled in Ireland can reduce the US withholding tax on dividends for their European investors.

With the index replication tool, you can test how well the S&P 500 can be built from its eleven sector ETFs or from value and growth. The backtest shows how an S&P 500 fund behaves next to a world fund. A fund on the MSCI World already holds about 73% US stocks (MSCI World vs. ACWI); an additional S&P 500 fund increases that weight further.

Who the S&P 500 suits: a benchmark with an earnings filter and heavy concentration

The S&P 500 suits you if you want to track the US market through its best-known benchmark. S&P Dow Jones Indices estimates that about $23 trillion was benchmarked to the index at the end of 2025, about $16 trillion of it in index investments (S&P DJI, Indexed Asset Survey 2026); futures, options and ETFs are correspondingly liquid and cheap. It is also hard to beat: over 20 years to mid-2025, 91% of active US large-cap funds trailed the index (S&P DJI, S&P 500 brochure 2025). And the earnings rule keeps speculative newcomers out until they show profits.

It suits you less if you expect broad diversification. Ten stocks carry 39%, the index is effectively diversified like at most 44 companies, and a slump in the large technology stocks hits the whole index. A committee decides on additions; the process is described transparently but is not fully predictable. Valuations are high, too, as a price-to-book ratio of 5.34 and a dividend yield of 1.10% show (SPDR S&P 500 factsheet 2026). Investors outside the US also carry dollar risk, and if you already own a total market or world fund, you hold the large US stocks already.

This article explains a method; it is not investment or tax advice. Worked examples are simplified and rounded. All terms in the glossary.