What is S&P500?

As I began following the stock market, I begin to realise many stocks are in reference to S&P500.

Courtesy of fool.com

So what in the world IS S&P500? This really bugged me. Every US stock I monitored had that irritating line that defines itself as S&P500.

After some research, I understood that S&P500 is in short for Standard & Poor 500. That didn't really help, I just had more "huhs?"

Well here it goes then.

S&P500 is used as a bench mark for US share prices. It is made up of 500 different companies each with diffferent liquidity, size and sector. To put it simply, it's the average price you would pay if you would buy shares from all 500 different companies.

Bet you didn't know that...

The word "poor" in Standard & Poor doesn't literally mean "poor" from the dictionary. It was created by Henry Varnum Poor and the Standard Statistics Bureau. Hence the name, Standard & Poor.