Stock Pickers Par Excellence - Standard and Poor's 500-Stock Price Index - Brief Article

Kiplinger's Personal Finance Magazine, August, 1999 by Manuel Schiffres

Expenses are the single most important factor in distinguishing among funds that track the same index. An S&P 500 fund with an expense ratio of 0.2% per year should outperform one with an expense ratio of 0.5% by 0.3 percentage point per year. But you might decide that it's worth paying 0.4% per year for T. Rowe Price's S&P index fund because you like the rest of the Price fund lineup and because, unlike Vanguard, Price lets you switch in and out of its fund over the phone. "For the average investor, there's really not much point looking beyond Vanguard for index funds," says John Rekenthaler, Morningstar's director of research. "But are you really being hurt that much by going with a company that charges 0.3% or 0.4% for its index funds?"

THE S&P 500, THEN AND NOW

The top ten holdings of Standard & Poor's 500-stock index, as measured by market capitalization.

                              MARKET VALUE
1978                           (BILLIONS)

 1. IBM                                $43
 2. AT&T                                40
 3. Exxon                               22
 4. General Motors                      15
 5. General Electric                    11
 6. Eastman Kodak                        9
 7. Royal Dutch Petroleum                9
 8. Standard Oil Indiana                 8
 9. Schlumberger                         8
10. Standard Oil California              8

                              MARKET VALUE
1999                           (BILLIONS)

 1. Microsoft                         $407
 2. General Electric                   333
 3. IBM                                215
 4. Exxon                              194
 5. Wal-Mart Stores                    190
 6. Intel                              180
 7. AT&T                               175
 8. Cisco Systems                      172
 9. Coca-Cola                          168
10. Merck & Co.                        161

RELATED ARTICLE: EVERYTHING YOU NEVER KNEW ABOUT THE S&P

Market value of all 500 companies $10.7 trillion

Average market value $21.4 billion

Median market value (value of the 251st stock) $8.7 billion

Biggest of them all Microsoft, at $440 billion (3.8% of the index's market value)

Smallest of them all Foster Wheeler, $560 million (0.005% of the index's market value)

Portion of index represented by 25 biggest names 38%

Technology and telecom companies among the 25 biggest S&P stocks 10

Portion of index represented by 350 smallest stocks 20.3%

Largest U.S. company not in the S&P 500 Berkshire Hathaway (market value, $110 billion)

Number of Nasdaq listings in the S&P 500 39

Number of American Stock Exchange listings in the S&P 500 1 (Hasbro)

Last stock added Florida Progress Corp.

Last stock removed Morton International (company was acquired)

SOURCE: Standard & Poor's3