S&P 500: What It Is and How Companies Get Added

Updated 14 November 2026 · Standard formula, shown below

This page explains what the S&P 500 is and how companies are added to or removed from the index. You’ll learn the basic rules for inclusion, the role of the index committee, and how the index is weighted. No calculator is needed here—this is a reference guide to one of the most widely followed stock market benchmarks in the world.

Background: Why the S&P 500 Exists

The S&P 500 (Standard & Poor’s 500) is a stock market index that tracks the performance of 500 large companies listed on U.S. stock exchanges. It was introduced in 1957 by Standard & Poor’s, a financial data company that had been publishing market statistics since the early 1900s. The index was designed to give investors a single number that represents the overall health of the U.S. large-cap stock market.

Today, the S&P 500 is managed by S&P Dow Jones Indices, a joint venture owned by S&P Global, CME Group, and News Corp. The index is widely used as a benchmark for mutual funds, exchange-traded funds (ETFs), and institutional portfolios. When people say “the market is up,” they usually mean the S&P 500 is up.

How the Index Is Constructed

The S&P 500 is a market-capitalization-weighted index. That means each company’s weight in the index is proportional to its total market value (share price multiplied by shares outstanding). Larger companies have a bigger impact on the index’s daily movement than smaller ones.

For example, if Company A has a market cap of $2 trillion and Company B has a market cap of $500 billion, Company A will have roughly four times the influence on the index’s return. This is different from a price-weighted index like the Dow Jones Industrial Average, where higher-priced stocks have more influence regardless of company size.

The index is calculated in real time during U.S. trading hours. The formula is straightforward: the sum of the adjusted market capitalizations of all 500 companies, divided by a divisor. The divisor is a proprietary number that adjusts for stock splits, dividends, and other corporate actions so that the index value remains continuous over time.

Eligibility Criteria: What Makes a Company Eligible?

Not every large company qualifies. S&P Dow Jones Indices applies a set of objective criteria that a company must meet to be considered for inclusion. These criteria are reviewed regularly and are published in the index methodology document.

Market capitalization: The company must have an unadjusted market cap of at least $15.8 billion (as of the 2024 methodology update). This threshold is reviewed periodically and can change.
Liquidity: The company must have a sufficient trading volume. Specifically, the ratio of annual dollar value traded to float-adjusted market cap must be at least 0.75, and the company must trade at least 250,000 shares per month in the six months before evaluation.
Financial viability: The company must have positive earnings in the most recent quarter and in the sum of the trailing four quarters. This is to ensure the company is profitable, not just large.
Public float: At least 10% of shares must be publicly traded (not held by insiders or large blockholders).
U.S. presence: The company must be incorporated in the U.S. and have its primary listing on a U.S. exchange. It must also generate a significant portion of its revenue from U.S. operations, though the exact definition of “significant” is flexible.

These criteria are minimums. Meeting them does not guarantee inclusion—the committee can still decide to exclude a company for other reasons.

The Index Committee: Who Decides?

The S&P 500 is not a purely rules-based index. A committee of economists and index analysts at S&P Dow Jones Indices makes the final decisions. The committee meets regularly to review the index composition and can add or remove companies at any time, though most changes happen during quarterly rebalancing.

The committee’s goal is to keep the index representative of the U.S. large-cap market. They may add a company that meets the criteria, but they may also delay adding a company that is borderline or that has unusual corporate governance. Conversely, they may remove a company that no longer meets the criteria or that is being acquired.

One common misconception is that the committee simply picks the 500 largest companies. That is not true. The index aims to cover approximately 80% of the U.S. equity market’s total market cap, but the selection is not purely by size. The committee uses judgment to maintain sector balance and avoid over-concentration in a single industry.

How Companies Are Added: The Process

When a company is added to the S&P 500, it is usually because of one of three events:

Organic growth: A company’s market cap and liquidity have grown to meet the criteria over time. The committee adds it during a quarterly rebalancing.
Replacement: A company is removed (due to acquisition, bankruptcy, or delisting) and a new company is added to fill the slot. This is the most common reason for an addition.
Special addition: In rare cases, the committee adds a company outside the regular schedule, often because of a major event like an IPO of a very large company (e.g., Facebook in 2013).

The actual process involves a formal announcement. S&P Dow Jones Indices publishes a press release announcing the change, usually at least a few days before the effective date. The change takes effect at the close of trading on a specified date. Index funds that track the S&P 500 must buy or sell shares of the affected companies to match the new composition, which can cause a temporary spike in trading volume for those stocks.

For example, when Tesla was added in December 2020, it was one of the largest additions in history. Index funds had to buy billions of dollars worth of Tesla shares, which pushed the stock price up in the days before the effective date.

Removals: Why Companies Leave

Companies are removed from the S&P 500 for several reasons:

Merger or acquisition: If a company is acquired and no longer trades independently, it is removed. The acquirer may or may not be added, depending on whether it already is in the index.
Bankruptcy: A company that goes bankrupt and is delisted is removed.
Failure to meet criteria: If a company’s market cap drops below the threshold or its financial viability deteriorates, the committee may remove it. However, the committee often gives existing members leeway—they are not automatically removed if they temporarily fall below the threshold.
Corporate restructuring: If a company moves its headquarters abroad or changes its primary listing to a non-U.S. exchange, it may be removed.

Removals are less common than additions. The index is designed to be stable, so the committee prefers to keep companies unless there is a clear reason to remove them.

Common Misconceptions and Limits

One common question is whether the S&P 500 includes only U.S. companies. The answer is yes, but with a nuance: a company can be incorporated in the U.S. and listed on a U.S. exchange even if it earns most of its revenue abroad. For example, Apple and Microsoft are considered U.S. companies even though they sell products globally. Conversely, a company like Nestlé, which is Swiss, cannot be in the index even if it has a large U.S. presence.

Another misconception is that the S&P 500 is a fixed list of 500 companies. In practice, the number varies slightly due to additions and removals. As of 2024, the index typically holds 503 or 504 stocks because some companies have multiple share classes (e.g., Alphabet has Class A and Class C shares, both of which are included).

The index also has a limit: it only covers large-cap stocks. It does not include mid-cap or small-cap companies, so it is not a complete picture of the U.S. stock market. For that, you would look at the S&P Composite 1500, which combines the S&P 500, S&P MidCap 400, and S&P SmallCap 600.

Frequently Asked Questions

What is the minimum market cap to be in the S&P 500?

As of the 2024 methodology, the minimum unadjusted market cap is $15.8 billion. This threshold is reviewed periodically and can be adjusted upward or downward based on market conditions.

How often does the S&P 500 change its composition?

Changes can happen at any time, but most occur during quarterly rebalancing in March, June, September, and December. Special additions can happen between those dates if a major event occurs, such as a large IPO.

Does the S&P 500 include dividends?

The standard S&P 500 index is a price index, meaning it does not include dividends. However, there is a separate version called the S&P 500 Total Return Index that assumes dividends are reinvested. Most ETFs track the price index, but some track the total return version.

Can a company be in the S&P 500 if it is not profitable?

No. The index requires positive earnings in the most recent quarter and in the sum of the trailing four quarters. This is a hard rule, though the committee can make exceptions in rare cases, such as for companies that are about to become profitable.

Why is the S&P 500 so important?

It is the most widely followed benchmark for U.S. large-cap stocks. Many index funds and ETFs track it, so millions of investors are indirectly invested in the index. Its daily movements are reported by financial news outlets as a proxy for the overall stock market.

How can a company get added to the S&P 500?

A company must meet the eligibility criteria (market cap, liquidity, profitability, etc.) and then be selected by the index committee. The committee typically adds companies during quarterly rebalancing, but can do so at any time. There is no application process—companies are chosen based on data and committee judgment.

Method: the standard formula for this calculation, rounded as each result states. See how the calculators work or report an error.