How is the S&P 500 Index Constructed?
Stocks in the S&P 500 are chosen so that, in aggregate, they represent a broad distribution of industry groups. Unlike market benchmarks such as the Russell 1000 or the Wilshire 5000, inclusion in the Index is not automatic. Rather, the Standard & Poors Index Committee makes decisions about additions or deletions. Generally, new additions are drawn from under-represented segments of the market. This means that in the 1960s steel companies were added. During the 1970s energy company stocks were prevalent. The 1980s saw the addition of consumer goods and healthcare companies. And in the 1990s, financial services and technology companies dominated the new names. When a stock is added, its weight in the index is based on the total market capitalization, including those shares that are not readily tradable. This methodology stands in contrast to the Russell weighting method, in which only free-floating shares are included. In the case of Microsoft (the largest component in both indices), th
