S&P 500.

In plain English

The S&P 500 is an index of roughly 500 of the largest U.S. publicly traded companies, weighted by market cap. It covers about 80% of total U.S. equity market value. When financial news says 'the market was up today,' they almost always mean the S&P 500. The index is maintained by S&P Dow Jones Indices and updated for inclusions and removals on a quarterly schedule. Owning an S&P 500 index fund is the simplest broad U.S. equity exposure most investors can buy.

01Why it matters

For long-term investors, the S&P 500 has returned roughly 10% per year on average since 1926, including dividends, before inflation. That return is not guaranteed and the year-to-year path is bumpy (down 37% in 2008, up 26% in 2021), but the long-run trajectory is the closest thing finance has to a default expectation.

02The math, step by step

$10,000 invested in an S&P 500 index fund in 1985 (when the index was around 200) grew to roughly $400,000 by 2024 (when the index crossed 5,500), assuming dividends reinvested. The same money in a savings account averaging 2% would have grown to about $22,000.

03What this is NOT