Widely regarded as the best single indicator of large-cap US equities, the S&P 500 index has crossed a milestone figure of 4,000 for the first time in its 64 years of history. S&P 500 index has generated a compounded annualized growth rate of over 12 per cent in the last 10 years. According to Bloomberg data, while it took almost five years for the index to rise from the 2,000 milestone to 3,000 in July 2019, the latest 1,000-point trip took about 21 months. The recent rise in the index is on back of the rise in stock prices of energy and financial sectors. YTD returns for the S&P 500 index are nearly 12 per cent.
As an Indian investor looking to diversify your investment portfolio, S&P 500 index offers the opportunity to make money across global stocks. The best US stock market index and also the most important US stock index could probably be the S&P 500 index and is considered to be the top-most single indicator of large-cap US stocks.
“It took the index 23 years to grow from 1,000 to 4,000 but it may only take a decade to reach 10,000 from here”, says Larry Adam, Chief Investment Officer, Raymond James Financial.
S&P 500 performance
Over the last 1-year, 3-year and 5-year, the annualized returns in the S&P 500 index has been about 44 per cent, 15 per cent and 14.5 per cent respectively.
As on April 16, 2021
S&P 500 index sectors
S&P 500 Index includes nearly 500 leading corporates across about 11 sectors. The top three sectors in the S&P 500 are Information Technology, Health Care and Communication Services totaling about 50 per cent of the index. The breakdown of various sectors is as follows:
Information Technology – 26.6 per cent
Health Care – 13 per cent
Communication Services – 10.9 per cent
Financials – 11.3 per cent
Consumer Discretionary – 12.4 per cent
Industrials – 8.9 per cent
Consumer Staples – 6.1 per cent
Utilities – 2.7 per cent
Energy – 3 per cent
Real Estate – 2.5 per cent
Materials – 2.7 per cent
Top S&P 500 stocks
If you want to own the top S&P 500 stocks, the top three choices could be Microsoft, Apple and Amazon by index weightage. Some other top US stocks are as follows:
Microsoft Corp – Information Technology
Tesla Inc. – Consumer Discretionary
Apple Inc. – Information Technology
Amazon.com Inc – Consumer Discretionary
Facebook Inc A – Communication Services
Alphabet Inc A – Communication Services
Alphabet Inc C – Communication Services
Johnson & Johnson – Health Care
Berkshire Hathaway – Financials
Johnson & Johnson – Health Care
JP Morgan Chase & Co – Financials
While most Indian investors opt for the more popular Nasdaq index stocks, remember that the Nasdaq is an Information Technology heavy index, while the S&P 500 Index is a much broader based index. There are 100 stocks listed on the Nasdaq whole on the S & P 500 Index, there are 500 stocks thus giving a much diversified flavour to those who want to diversify their international portfolio. Further, there are large and mid-cap stocks listed on Nasdaq while S&P 500 Index only has large-cap stocks. If you wish to invest in the entire lot of S&P 500 index stocks, you can consider investing in the SPDR S&P 500 ETF also known as SPY that tracks the S&P 500 index.