What happens when a stock is added to the S&P 500?

Many beginner investors aren’t familiar with what happens when a stock is added to the S&P 500. However, the history books show that taking advantage of the S&P 500 inclusion effect can potentially be one of the most lucrative opportunities the market offers. This guide explains what the S&P 500 is. We'll look at how it works and how stocks behave when they become a part of the index. Let’s examine whether the inclusion effect still works today.

Standard & Poor’s 500 Index, or S&P 500 for short, is a market-capitalization-weighted index comprising 500 of the leading listed companies in the U.S.In layman’s terms, the S&P 500 is “the market.”

It includes some of the world’s leading companies from 11 sectors, including IT, health care, consumer discretionary, industrials, energy, real estate, and more. The broad diversification is why the index is considered the best reflection of the U.S. stock market performance.

0:00 Title
0:12 Intro
0:39 Disclaimer
0:54 What is the S&P 500?
3:09 How it works
4:28 Selection and removal criteria
6:40 The inclusion effect
9:07 Final thoughts

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