by Ernesto R. Martin

S&P stands for Standard & Poor, a financial services company. The S&P 500 Index is a measure, reported daily in the news, of the value of these companies. Other indexes are the Dow Jones (or simply The Dow, which has an annual performance very similar to that of the S&P 500 Index) and the Nasdaq. S&P 500 index mutual funds invest in the 500 companies on the basis of size. So in an investment of $10,000, $80 might go to the largest of the 500 firms and $1 might go to the smallest. Size of a company is determined by its capitalization, which is the value of the shares times the number of shares outstanding, in other words, what it would cost for you to buy all the shares from all the shareholders of that company.