Let’s take a look then at one of the longest time series in the finance world, the monthly average of the S&P 500.
If you are somewhat familiar with the S&P 500 index, you might think, “wait, I thought the Dow was the oldest index? Wasn’t the S&P 500 first published in 1957, well after the Dow?” And, that’s correct!
However, some people much smarter than I am have calculated what the index would have been historically had it existed. Specifically, this data is from Robert Shiller, who I trust because he has a Nobel Prize (a pretty decent qualification).
The chart above should look very familiar to the Dow Jones Industrial Average. And, basically, they are the same thing - representative benchmarks of the stock market. It’s just that the Dow Jones is a basket of 30 stocks and the S&P 500 is a basket of, you guessed it, 505 stocks. (The trick is that those 505 stocks represent 500 companies.) People like using the S&P because they are snobby and feel using a bigger basket of stocks representing a broader share of the market makes them superior to people who prefer the Dow.
And, here is what the S&P 500 has been doing in the previous year:
There is much more to the S&P 500 than just the index. Here are additional related metrics that may be of interest: