(ThePennyWatcher.com) – We all have heard of The S&P 500, but what really is it?
The acronym S&P 500 stands for Standard & Poor’s 500 Index. You don’t need to be a wall street guru to understand. Put simply, it’s a collection of the United States top performing companies across tech, finance, healthcare, and more.
Think of a 30,000 foot view of the best companies having the most financial success.
The S&P 500 has been around for some time, and is known for it’s stability to handle ups and downs in the market, making it a solid investment strategy in the long run.
While it has maintained an impressive ride of stability, there have of course been some dips along the way as the economy experienced changes.
The Dot-Com Bubble:
Back in the late ’90s, tech companies were skyrocketing in growth as we moved toward the dot.com bubble, so in turn The S&P 500 soared to unprecedented heights. But the bubble did burst, and came crashing down.
Some people made a lot of money, and some people lost a ton.
In the early 2000’s the performance weathered the storm until about 2008 when we hit the housing financial crisis. As we all know, things took a quick turn for this worse as millions dealt with financial struggle amidst a variety of factors.
Yes it’s like a roller coaster, where there are highs and lows.
Around 2010 the S&P 500 started to experience high growth once again, as more tech giants emerged on the scene. The overall economy was very strong as well, and the general public seemed to be in a good position. Companies were doing well, and everyday expenses weren’t out of control.
As things happen within the economy, analysts try to make it fairly simple for beginner investors to understand what actually makes things move one way or another.
Here are some basic factors:
Company Performance: As the S&P 500 is a collection of companies, each company successes or struggles influence the overall performance.
When companies report strong earnings and growth, their is in turn a rise in performance. One goes up, the other follows.
Economic Conditions: Of course factors like employment, consumer spending, and inflation. So depending on these numbers, things will align and follow.
Global Events: Any catastrophic event, or crazy political times can have an imense affect on the performance of companies bottom line. This is a scary factor that we all hope maintains stability.
The Thrills and Lessons of the Ride
If you really look back far enough, the S&P 500’s performance history speaks for itself and one thing becomes clear. iInvesting is like riding a roller coaster, but it eventually comes back down and evens out.
It’s pretty re-markable the gains many people have seen when sticking to their guns and riding the waves over time.
It’s certainly a mix of exhilarating highs and unexpected drops, but that is part of the game and it’s essential to keep your eyes on the big picture.
As mentioned. the S&P 500 has been quite the reliable player for investors over time. Analysts say it’s like that friend who’s always got your back!
And when you have a good friend that backs you up, it gives you peace of mind that regardless of what happens, you have someone that is there to help and support you.
The market is not your friend of course, but we hope that helps send home the general message!
Good luck in your investing.
