Introduction
The S&P 100 Index is a stock market index of United States stocks maintained by Standard & Poor's. It is a price-weighted index, meaning that the weight of each stock in the index is determined by its price. The S&P 100 Index is one of the most widely followed stock market indices in the world, and it is often used as a benchmark for other stock market indices.
The S&P 100 Index was created in 1975, and it currently consists of 100 of the largest and most actively traded stocks in the United States. The stocks in the S&P 100 Index are selected by a committee of analysts at Standard & Poor's, and they are reviewed quarterly.
The S&P 100 Index is a good measure of the performance of the large-cap stock market in the United States. It is also a good proxy for the performance of the U.S. economy, as large-cap stocks tend to be more sensitive to economic growth than small-cap stocks.
Performance of the S&P 100 Index
The S&P 100 Index has performed very well over the long term. The index has returned an average of 10% per year since its inception in 1975. This is significantly higher than the return of the U.S. stock market as a whole, which has returned an average of 7% per year over the same period.
The S&P 100 Index has also outperformed the U.S. bond market over the long term. The bond market has returned an average of 5% per year since 1975.
The strong performance of the S&P 100 Index is due to a number of factors. One factor is the strong performance of the U.S. economy. The U.S. economy has grown at an average rate of 3% per year since 1975. This economic growth has led to higher corporate profits, which has in turn led to higher stock prices.
Another factor that has contributed to the strong performance of the S&P 100 Index is the increasing globalization of the U.S. economy. The U.S. economy is now more integrated with the global economy than ever before. This has led to higher sales and profits for U.S. companies, which has in turn led to higher stock prices.
Risks of Investing in the S&P 100 Index
There are a number of risks associated with investing in the S&P 100 Index. One risk is the risk of stock market volatility. The stock market can be volatile, and stock prices can go up and down sharply. This can lead to losses for investors who invest in the S&P 100 Index.
Another risk associated with investing in the S&P 100 Index is the risk of economic recession. The U.S. economy can go into recession, and this can lead to lower corporate profits and lower stock prices.
Finally, there is the risk of inflation. Inflation can erode the value of stocks, and this can lead to losses for investors who invest in the S&P 100 Index.
Conclusion
The S&P 100 Index is a good measure of the performance of the large-cap stock market in the United States. It is also a good proxy for the performance of the U.S. economy. However, there are a number of risks associated with investing in the S&P 100 Index, including the risk of stock market volatility, the risk of economic recession, and the risk of inflation.
Investors should carefully consider these risks before investing in the S&P 100 Index.