Understand the system used to choose S&P 500 constituents

An index committee, with members including S&P economists and index analysts, chooses the 500 stock constituents for the Standard & Poor's 500 chart. The stocks represented in the S&P equity quotes of the Standard & Poor's 500 are in proportion to their market capitalization numbers, making it a market capitalization-weighted index. During the yearly reconstruction, there are anywhere from 25 to 50 additions and subtractions of constituents to the S&P 500 so that investors have the best information on new and growing stocks.

I recommend: Obtain more information of the calculation process for the S&P 500 index, and a list of the current constituents, by visiting the methodology page on the Standard & Poor’s website. Investopedia provides further information on the intricacies of S&P 500 Index.

Use the S&P 500 equity index to measure large cap stocks

The S&P 500 Index represents over 75% of the large cap companies available on the U.S. stock market. Many consider it one of the benchmark standards for stock investment portfolios. The goal of the S&P 500 index is to include companies that comprise all of the major markets in the U.S. economy. Rather than the largest 500 companies in the stock market, it contains the 500 most widely held companies, based upon their market size, trading activity and industrial sector.

I recommend: Obtain up-to-date information on the S&P 500 index from the Standard & Poor's website or MSN Money. Visit The Motley Fool for additional information on advantages and weaknesses of the S&P 500.

Track the global market through a Standard & Poor's index

While the U.S. Standard & Poor's equity indices may fit your needs by providing the stock market trends for a broard range of different companies, their global equity indices provide information for an ever-growing global industry that harnesses ample opportunities for substantial international earnings. The S&P Global 1200 encompasses 7 regions and countries with approximately 70% of the global market represented across 29 local markets.

I recommend: Access detailed information on the S&P Global 1200 on the Standard & Poor’s website. Obtain data services from RIME Technologies on various Standard & Poor’s global indices.

Invest in an S&P 500 equity index fund

Mutual funds and exchange traded funds (ETFs) that follow the S&P 500 index are widely available and one basic investment strategy is to invest small amounts in an S&P fund regularly over a long stretch as a way of playing the general upward rise of the stock market.

I recommend: Consider the S&P 500 mutual funds from Vanguard or Fidelity for long-term investment or the S&P 500 ETF from iShares for trading.