By far the most diverse stock index, Standard & Poor's 500 index is made up 500 stocks of U.S. companies with a large market capitalization. The S&P 500 is one of the most followed stock indexes, which means there's a lot of information about the index and the stocks listed on it for investors to research.
"It's so heavily followed that there's so much information, it's easy to analyze," says Jared Levy, a stock strategist at Chicago-based Zacks Investment Research. "The S&P is the most accurate gauge of medium-to-large businesses in the U.S."
To be included in the S&P, a company has to meet certain criteria including size and market capitalization. What makes the S&P a better barometer of the stock market is its size compared to the Dow. That gives investors a much larger sample size than the Dow, says Paul Larson, an equities strategist at Chicago-based Morningstar Inc.