Lesson 04 · S&P 500

The S&P 500: owning a slice of big U.S. companies.

How it works

The S&P 500 is a stock market index of large U.S. companies, maintained by S&P Dow Jones Indices. You can't buy an index directly; people get exposure through index funds. Per the SEC's Investor.gov, an index fund is a mutual fund, ETF or unit investment trust with a passive strategy designed to achieve approximately the same return as an index before fees, which usually means less trading and lower fees than actively managed funds.[1] Over time, higher fees can significantly lower returns.[1]

Documented history: crashes and recoveries

Oct 19, 1987 ("Black Monday"): the Dow fell 22.6% in one daySource: Federal Reserve History, Stock Market Crash of 1987

U.S. stocks surpassed their pre-crash highs less than two years later. Black Monday led to circuit breakers: the NYSE now halts trading temporarily when the S&P 500 falls 7%, 13% and 20%.[2]

Oct 2007 → Mar 2009: S&P 500 fell 57% peak to troughSource: Federal Reserve History, The Great Recession

Watch out: risks

Sources

  1. SEC Investor.gov, "Index Fund" glossary
  2. Federal Reserve History, "Stock Market Crash of 1987"
  3. Federal Reserve History, "The Great Recession"

Fetched Oct 13, 2026.

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