Did you know that an estimated $13.5 trillion in assets are indexed or benchmarked to the Standard & Poor’s 500 Composite Index, including $5.4 trillion in index assets? (1,2) The S&P 500 is ubiquitous – we see it on the news, read about it in the newspapers, and, very likely, see some of our own investments’ performance compared against it. For an index that represents approximately 80% of the value of the U.S. equity market, it may be worthwhile to gain a better understanding of how it works. (1) Cap & Criteria The index, as we know it today, was introduced in 1957 and is maintained by the Standard & Poor’s Index Committee. Contrary to popular belief, it is not comprised of the 500 largest companies in America, but is a collection of large-cap stocks representing a broad range of market sectors, including technology, energy, health care, and consumer staples, among others. (3) There are a number of criteria a company must meet to be considered for inclusion in the index. Some of these criteria include the following: it must be a U.S. company, have an unadjusted market capitalization of $15.8 billion or more, have 50% of its stock available to the public, and have four consecutive quarters of positive earnings. (4) Changes Over Time Another common misconception is that the index is a static one. In fact, companies will be removed, from time to time, for reasons that include violation of one or more of the criteria used for adding companies or because of a merger, acquisition, or significant restructuring, including bankruptcy. The turnover in the index’s constituent companies was 3.2% in 2021 (per the most recent data available). According to one projection, the average tenure of companies in the index is expected to fall to 15-20 years this decade, as compared to the 30-35 year average tenure in the late 1970s. (5) Add and Subtract When changes are made to the index, many mutual funds and exchange-traded funds that seek to replicate the index may have to sell stocks that are being removed and buy the stocks that are being added in order to track the index. Keep in mind that amounts in mutual funds and ETFs are subject to fluctuation in value and market risk. Shares, when redeemed, may be worth more or less than their original cost. (6) Mutual funds and exchange-traded funds are sold only by prospectus. Please consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this and other information about the investment company can be obtained from your financial professional. Read it carefully before you invest or send money. Investors cannot invest in an index. Also, index performance is not indicative of the past performance of a particular investment, and past performance does not guarantee future results. Investment choices designed to replicate any index may not perfectly track it, and their returns will be reduced by fees and expenses. 1. US.Spindices.com, May 31, 2022 (most recent data available) 2. The S&P 500 Composite index (total return) is an unmanaged index that is generally considered representative of the U.S. stock market. Index performance is not indicative of the past performance of a particular investment. Past performance does not guarantee future results. 3. Investopedia.com, June 21, 2023 4. SPGlobal.com, February 2024 5. Innosigh.com, 2021 (most recent data available) 6. Keep in mind that the return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost.

Capital gains result when an individual sells an investment for an amount greater than their purchase price. Capital gains are categorized as short-term gains or long-term gains.