What is the S&P 500? A plain guide for European investors

What the S&P 500 is

What is the S&P 500? It's a stock market index: a list of companies, with a rule for how much each one counts, whose combined value is turned into one number. When people say "the market was up today" in the US, they often mean the S&P 500.

According to S&P Dow Jones Indices, the company that runs it, the S&P 500 was created in 1957 and was the first US stock index weighted by company size. It includes 500 leading companies across the main industries of the US economy and covers about 80% of the available market value of US shares. As of July 2026 it had 503 constituents, because a few companies have more than one class of share listed.

It doesn't include smaller US companies. S&P has separate indices for those, and together they form the S&P Composite 1500.

How companies are chosen

The S&P 500 isn't simply the 500 biggest US companies. A company has to meet a set of rules to be added. S&P Dow Jones Indices' factsheet summarises them (as of July 2026):

• US company. Only US companies are eligible.
• Size. A total market value of at least $22.7 billion, with at least half of that threshold in shares freely available to trade.
• Free float. At least 10% of the shares must be available to the public, not locked up with founders or governments.
• Profits. Positive reported earnings in the most recent quarter, and over the last four quarters added together.
• Liquidity. The shares must trade often enough, including at least 250,000 shares in each of the six months before the review.
• Sector balance. S&P also considers how well each sector is represented.

Funds, ETFs and certain other types of security can't be included. The full rules are in S&P's US indices methodology. The index is rebalanced every quarter, in March, June, September and December.

How it's weighted, and why that matters

The S&P 500 is float-adjusted market-cap weighted. In plain words: each company counts in proportion to the value of its shares available to trade. A company worth ten times more than another has roughly ten times the influence on the index.

This creates concentration. In July 2026, according to S&P Dow Jones Indices:

The top 10 list included Nvidia, Apple, Microsoft, Amazon, Alphabet (two share classes), Broadcom, Meta, JPMorgan Chase and Berkshire Hathaway. Several of those are technology companies, so a fall in big tech moves the whole index.

Concentration isn't automatically bad: those companies are big because they've grown. But it means an S&P 500 fund is less evenly spread than "500 companies" suggests, and it holds only US companies. A world index fund spreads money across many countries. Our guide to index funds vs individual stocks covers diversification in more detail.

How Europeans can track the S&P 500

You can't buy an index, but you can buy a fund that copies it. In the EU, retail investors usually buy UCITS ETFs. UCITS is the EU's rulebook for investment funds sold to the public, covering things like how the fund spreads its money and how it keeps your assets safe. S&P's own factsheet lists many UCITS ETFs linked to the index, traded on exchanges such as Xetra, Euronext and the London Stock Exchange.

When comparing S&P 500 ETFs, look at:

• The yearly fee (TER). Broad index ETFs often charge well under 0.5% a year.
• Accumulating or distributing. Whether dividends are reinvested or paid out to you.
• Physical or synthetic. Whether the fund holds the shares or copies the index through a swap contract with a bank.
• Currency hedged or not. Hedged versions try to remove the effect of the dollar.
• Your broker's costs. Trading and currency conversion fees come on top.

We don't recommend specific funds. Our guide to what an ETF is explains these terms, and our comparison of investing apps in Europe looks at where you can buy them.

Currency risk for euro investors

The companies in the S&P 500 are priced in US dollars. If you invest in euros, your return depends on two things: how the index does in dollars, and how the dollar moves against the euro.

Here's a simplified example. You invest €1,000 when €1 buys $1.10, so you hold $1,100 of the index. Over a year, the index rises 10% to $1,210.

• If the euro strengthens to $1.20, your $1,210 is worth €1,008.33 in euros. Most of the gain is gone.
• If the euro weakens to $1.00, your $1,210 is worth €1,210: the dollar adds to your gain.

These exchange rates are made up to show the effect. Even if you buy an ETF priced in euros, the underlying shares are in dollars, so the currency effect is still there unless the fund is hedged. Hedging reduces this risk but adds cost, and it removes the upside when the dollar strengthens as well as the downside.

Historical returns, stated carefully

S&P's factsheet reports that, in US dollars, the S&P 500's price return (which leaves out dividends) averaged 13.17% a year over the 10 years to 31 July 2026. The ride wasn't smooth: in 2022 the index fell 19.44%, and in 2018 it fell 6.24%.

Some points to keep in mind:

• These are past returns over one particular decade. Different periods can produce very different results, and past returns don't guarantee future ones.
• They are in dollars. A euro investor's return was different, because the exchange rate moved.
• They are before fund fees, taxes and broker costs.
• Most professional fund managers haven't beaten it: in S&P's SPIVA Mid-Year 2025 report, about 86% of active US large-company funds trailed the S&P 500 over 10 years.

Common mistakes

• Thinking it's a world fund. It's only the US. If you also own a world ETF, you hold many of the same companies twice.
• Forgetting the dollar. Your euro return can differ a lot from the headline index return.
• Expecting the last decade to repeat. Strong past returns can make it easy to underestimate risk.
• Comparing price returns with total returns. Headline figures often leave out dividends.

New to all of this? Start with our investing for beginners guide.