The companies that make up the S&P 500 index are selected by a select group of market professionals known as the Index Committee. Although commonly seen as a measure of market performance, the objective of the index is to provide an accurate picture of what is going on in the market.
In addition to choosing large cap stocks, companies must meet certain selection criteria including:
A minimum market capitalization ($13.1 billion as of August 2022)
A public float of at least 50%. This means that at least 50% of a company’s stock is available to the public and it has a stock price of at least $1 per share.
They must file a 10-K annual report
At least 50% of their fixed assets and revenues must be in the United States
They must have reported positive earnings for the most recent four quarters
They must have adequate liquidity as measured by price and volume
The committee rebalances the index every quarter (March, June, September, and December).