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The S&P 500—the Standard & Poor’s 500 Index—is considered to be one of the best measures of U.S. stock market performance, tracking 500 of the largest and most stable publicly traded companies in the country. The top 25 stocks in the S&P 500 by weight represent the largest, most influential companies in the index. The index is weighted by market capitalization, giving more significance to companies with larger market values.
Key Takeaways
- The S&P 500 is one of the best measures of U.S. stock market performance and the health of the economy more broadly.
- The index tracks 500 of the largest and most stable publicly traded companies.
- The S&P 500 is weighted by market capitalization, which means larger companies have more influence over the performance of the index.
- The top 25 stocks in the index by weight are the largest, most influential companies included in the S&P 500.
As of January 2024, large-cap technology companies, such as Microsoft Corp. (MSFT), Apple Inc. (AAPL), Nvidia Corp. (NVDA), Amazon.com Inc. (AMZN), and Meta Platforms, Inc. (META), combined hold over $10 trillion in total market cap, which makes these companies very influential in the S&P 500’s one-year gains of 20%.
How are Stocks Selected for the S&P 500?
To be included in the S&P 500, a company must:
- Be a U.S.-based company and trade on a major U.S. exchange
- Have a market cap of $15.8 billion or more and a float-adjusted market cap of at least 50% of the index’s total company-level minimum market capitalization threshold
- Have reported positive earnings in the most recent quarter, along with the past four consecutive quarters
- Have a float-adjusted liquidity ratio of 0.75 or greater
- Have traded a minimum of 250,000 shares in the previous six months before evaluation
The S&P 500 reconstitutes each June. Companies removed from the index are not replaced until the next annual reconstitution.
Top Sectors in the S&P 500
The table below lists the S&P 500’s top sectors by weighting as of Jan 25, 2024. The information technology, financials, healthcare, and consumer discretionary sectors carry a cumulative weight of 66%. Conversely, the lowest-weighted sectors include utilities, materials, and real estate, with a combined weight of just 6.8%.
| Top Sectors in the S&P 500 | |
|---|---|
| Sector | Weighting in the S&P 500 |
| Information Technology | 30.1% |
| Financials | 12.9% |
| Health Care | 12.5% |
| Consumer Discretionary | 10.2% |
| Communication Services | 9.0% |
| Industrials | 8.6% |
| Consumer Staples | 6.0% |
| Energy | 3.8% |
| Real Estate | 2.4% |
| Materials | 2.3% |
| Utilities | 2.2% |
Top 25 Companies by Index Weight
Below are the top 25 companies by index weight. The S&P Global website doesn’t disclose constituent weights, but we can use the S&P 500’s proxy exchange-traded fund (ETF), the SPDR S&P 500 ETF Trust (SPY), to cite index weights. Although the ETF’s holdings differ slightly from the underlying benchmark, they closely replicate its weights.
There were some changes to the top 25 in January — most notably, Tesla Inc. (TSLA) slipped
out of the top seven to the ninth position following its weaker-than-expected fourth-quarter earnings. Furthermore, the top 25 saw new entrants, as UnitedHealth Group Inc. (UNH) and Advanced Micro Devices Inc. (AMD) joined the list.
As of Jan. 25, 2024, here are the largest SPY holdings by weight:
| 1 | MICROSOFT CORP (MSFT): | 7.32% |
| 2 | APPLE INC (AAPL): | 6.95% |
| 3 | NVIDIA CORP (NVDA): | 3.71% |
| 4 | AMAZON.COM, INC (AMZN): | 3.49% |
| 5 | META PLATFORMS INC, CLASS A (META): | 2.12% |
| 6 | ALPHABET INC CL C (GOOG): | 1.83% |
| 7 | BERKSHIRE HATHAWAY INC. CL B (BRK.B): | 1.68% |
| 8 | TESLA, INC (TSLA): | 1.40% |
| 9 | BROADCOM INC. (AVGO): | 1.35% |
| 10 | ELI LILLY AND COMPANY (LLY): | 1.24% |
| 11 | JPMORGAN CHASE & COMPANY (JPM): | 1.21% |
| 12 | UNITEDHEALTH GROUP INC (UNH): | 1.16% |
| 13 | VISA INC. (V): | 1.06% |
| 14 | EXXON MOBIL CORP (XOM): | 0.98% |
| 15 | JOHNSON & JOHNSON (JNJ): | 0.94% |
| 16 | MASTERCARD INC (MA): | 0.89% |
| 17 | THE PROCTER & GAMBLE COMPANY (PG): | 0.88% |
| 18 | HOME DEPOT, INC. (HD): | 0.85% |
| 19 | COSTCO WHOLESALE CORP (COST): | 0.74% |
| 20 | MERCK COMPANY. INC. (MRK): | 0.74% |
| 21 | ABBVIE INC. (ABBV): | 0.71% |
| 22 | ADVANCED MICRO DEVICES INC (AMD): | 0.70% |
| 23 | ADOBE INC (ADBE): | 0.68% |
| 24 | SALESFORCE INC (CRM): | 0.66% |
| 25 | CHEVRON CORP (CVX): | 0.62% |
Why Are the S&P 500’s Top 25 Stocks Important?
Analyzing the top 25 stocks of the S&P 500 by index weight is a useful way to assess the health of the U.S. stock market and the broader economy, reflecting the performance of key sectors, major companies, and the benchmark itself.
January saw continued gains for tech giants like Microsoft, Apple, Nvidia, and Amazon. In fact, the top seven names now comprise about 62% of the top 25’s weights, creating new levels of concentration. The outsized performance of tech names can be attributed to a resilient GDP, declining inflation, competitive positions leading to cash flow generation, and emerging trends such as AI.
How Do I Invest in the S&P 500 Index?
There are several options when considering an investment in the S&P 500, spanning a wide range of risk tolerances and investment styles. Exchange-Traded Funds (ETFs)—like the SPDR S&P 500 ETF Trust (SPY), iShares Core S&P 500 ETF (IVV), and Vanguard S&P 500 ETF (VOO)—are popular due to their low costs and ease of trading, behaving like stocks on the exchange. For a more traditional approach, index funds, such as the Vanguard 500 Index Fund (VFIAX) and Fidelity 500 Index Fund (FXAIX), offer a way to invest in the S&P 500, though they are traded only once per day at the market’s close. For those interested in more complex strategies, derivatives like options and futures, including the E-mini S&P 500, allow speculation on the future value of the index.
Advantages and Disadvantages of Investing in the S&P 500 Index
Investing in the S&P 500 Index offers key advantages, such as exposure to 500 of the largest U.S. companies, providing a diversified portfolio in a single investment. This diversity typically reduces risk compared to investing in individual stocks. Additionally, the historical performance of the S&P 500 has shown consistent long-term growth, making it a favored choice for investors with a long-term horizon who can wait out market volatility.
One disadvantage is the current heavy concentration in the top seven names, which could skew performance toward certain sectors or companies, potentially increasing risk. But that concentration has played a role in the success of the index. By comparison, the S&P 500 Equal Weight Index—a version of the S&P 500 index where each of the constituent companies has an equal weight, regardless of their market capitalization—is only up 4% over the past year, versus the S&P 500’s 20%.
The Bottom Line
The S&P 500, which weights constituent companies by market cap, is one of the best measures of U.S. stock market performance and the U.S. economy at large. Larger firms carry significantly more weight in the index than those with smaller market caps, giving tech giants more influence over the index. That’s why the S&P 500’s top 25 stocks can offer a good picture of the index’s performance, the trajectory of the stock market, and the country’s economic health.
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As of the date this article was written, the author does not own any of the above securities.