Why is the S&P 500 considered \"The Market\"?
 

In the investment world, one's performance is always compared to the market. Why do we consider the S&P 500 to be the market? Wouldn't the Wilshire 5000 or some other larger index be a better representation of the market since the S&P doesn't include small-caps? I realize that certain funds that invest in specific asset classes compare themselves to the appropriate benchmark indeces. Thanks in advance for the clarification.

Re: Why is the S&P 500 considered \"The Market\"?
 

S&P 500 is considered a good benchmark because historically it has beaten over 75% of the other funds out there. You can always find funds that beat it over the short-term, but it is hard to find funds that consistently beat it over the long-term.

A well-educated investor can probably beat it, but for the average joe, it the S&P 500 fund is a great investment.

Re: Why is the S&P 500 considered \"The Market\"?
 

The S&P is market cap weighted. The biggest stocks account for most of the market. The other 4500 combined probably isn't close to as much capitalization as the biggest 500.

Re: Why is the S&P 500 considered \"The Market\"?
 

[ QUOTE ]
The S&P is market cap weighted. The biggest stocks account for most of the market. The other 4500 combined probably isn't close to as much capitalization as the biggest 500.

[/ QUOTE ]

yeah 2% of the largest stocks account for 20% of the value and 10% of the stocks for 50%.

Re: Why is the S&P 500 considered \"The Market\"?
 

S&P 500 has a 99% correlation with the U.S. Stock Market since 1972(As far back as I have S&P 500 data).

Re: Why is the S&P 500 considered \"The Market\"?
 

[ QUOTE ]
S&P 500 has a 99% correlation with the U.S. Stock Market since 1972(As far back as I have S&P 500 data).

[/ QUOTE ]

How is the "U.S. Stock Market" defined here and why isn't that used as the benchmark?

Re: Why is the S&P 500 considered \"The Market\"?
 

[ QUOTE ]
[ QUOTE ]
S&P 500 has a 99% correlation with the U.S. Stock Market since 1972(As far back as I have S&P 500 data).

[/ QUOTE ]

How is the "U.S. Stock Market" defined here and why isn't that used as the benchmark?

[/ QUOTE ]

a holdover tradition from the days when compiling that much data was much more difficult and time-consuming than today, i would guess.

Re: Why is the S&P 500 considered \"The Market\"?
 

[ QUOTE ]
[ QUOTE ]
S&P 500 has a 99% correlation with the U.S. Stock Market since 1972(As far back as I have S&P 500 data).

[/ QUOTE ]

How is the "U.S. Stock Market" defined here and why isn't that used as the benchmark?

[/ QUOTE ]

My data on U.S. Stock Market represents >99% of the market capitalization.

Re: Why is the S&P 500 considered \"The Market\"?
 

To my knowledge, it's just because it's long-established and popular index.

The S&P 500 is a poor index to benchmark against.

Re: Why is the S&P 500 considered \"The Market\"?
 

[ QUOTE ]
The S&P 500 is a poor index to benchmark against.

[/ QUOTE ]Why?