Ernesto R. Martin Investing

S&P 500 INDEX STOCK MUTUAL FUNDS
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 the 500 largest U.S. companies; Standard & Poor revises the list of companies during the year, replacing those that are no longer among the 500 largest (e.g., because their value has diminished) with others whose value now puts them among the 500 largest. In this Index money is apportioned based on company size or capitalization**, so in an investment of $10,000, $80 might go to the largest of the 500 firms and $1 might go to the smallest. The better-known (or traditional) S&P 500 index mutual funds invest the same way, with greater weight on the larger (tech-heavy) companies.
In the lesser-known "equal-weight" S&P 500 index mutual funds, the same amount of money goes to each of the 500 companies, so there is less concentration on tech-heavy firms and greater weigh of industrial, financial, healthcare, and consumer discretionary companies.
Both funds have performed similarly over the years, as shown below.
Both types of funds are offered by all mainline investment firms, so, when you're ready, go to one of these firms and get started (I like Fidelity's FXAIX for the traditional fund because it has the lowest management fee, there are offices in most cities, and they don't hassle you to try to push you to one of their managed funds with higher fees, and I like Invesco's RSP for the equal-weight fund because it has the lowest management fee).

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* Other indexes are the Dow Jones (or simply The Dow, which consists of 30 stocks selected to represent the overall market and has an annual performance very similar to that of the S&P 500 Index) and the Nasdaq 100 (consisting of the 100 largest technology companies).
** Size of a company is determined by its market capitalization, which is the cumulative value of all the shares in circulation, in other words, what it would cost for you to buy at current prices all the shares from all the shareholders of that company.