What's the criteria used for a stock to be added to the S&P 500 Index?

Question

I would like to know how does a stock get added on to the S&P 500 Index. I looked on the Standard and Poors website but I can't find anything specific to this. Any help will be appreciated!

Answer 1

The names in the S&P 500 are selected by committee. This is similar to the Dow 30, but different from others such as the Russell 1000, which are strictly rules-based.

Although the index includes many large companies in the US, it is not simply a list of the 500 biggest companies, and includes a handful (10 as of September 2006) that are incorporated outside of the US and are therefore technically not US companies. The companies are carefully selected to ensure that they are representative of various industries in the US economy. In addition, companies that do not trade publicly (such as those that are privately or mutually held) and stocks that do not have sufficient liquidity are not in the index. By contrast, the Fortune 500 attempts to list the 500 largest companies in the United States by gross revenue, regardless of form of ownership or liquidity, without adjustment for industry representation, and excluding companies incorporated outside the US.