The S&P 500 has just achieved three major milestones. What does this mean for your portfolio?

Standard & Poor's 500It is reasonable to say that the index is the most important stock market index.

It tracks the 500 largest companies in the U.S. (among other criteria). Since the U.S. has the largest economy and the largest stock market in the world, it makes sense that the S&P 500 is often cited as the most important benchmark index.

Here are the three major milestones the S&P just reached and some of the easiest ways to invest in Big Rock stocks.

1. Record high

On March 28, the last day of the first quarter of 2024, the S&P 500 closed at an all-time high. But this all-time high felt different from past records.

Over the past five years, the U.S. stock market has been in a documentary style. It hit record highs in early 2020, sold off sharply on COVID fears, recovered for the rest of 2020 and 2021, sold off in 2022 on inflationary pressures and recessionary fears, and then recovered in 2023, continuing into this year.

If you ask investors at the end of 2022 if the market will reach new highs in a little over a year, they might think you're wearing tinted glasses. But that's exactly what's happening, not because of the state of the economy, but because of what the economy might do.

The prospect of falling interest rates and increasing earnings is a punch in the gut to raise valuations. Investor sentiment is positive, and sentiment is a better driver of rallies than fundamentals-at least in the short term.

2.46 trillion dollars in market capitalization

Standard & Poor'sthe (whole) worldCompany (S&P Global), a subsidiary of S&P Dow Jones Indices, Inc.S&P The Dow Jones Indices are updated monthly. As of March 28, the S&P 500 had 503 constituents with a total market capitalization of US$46.25 trillion. In comparison, the S&P 500 China Index had 574 constituents with a total market capitalization of US$7.55 trillion.

The large size of the U.S. stock market illustrates the leadership of U.S. companies on the global stage and investors' recognition of the reliability of the U.S. economy relative to other stock markets.

3. Dominance of technology stocks

The S&P 500 is unique not only in its model, but also in its composition. Information technology accounts for 13.5% of China's S&P 500, but 29.6% of the S&P 500, meaning that US tech stocks in the S&P 500 are worth more than most of the world's stock markets.

In the past, investors may have thought thatNasdaq ResonanceThe index was more tech-oriented and the S&P 500 was more representative of the broader stock market, but that is no longer the case.

It should also be noted that the Financials sector accounts for 13.21 TP3T of the S&P 500 and the Healthcare sector accounts for 12.41 TP3T, which were basically nonexistent when the U.S. stock market started. At that time, the stock market was dominated by real industries such as manufacturing, utilities, communications, energy, and materials.

Understanding how the stock market ticks and how the S&P 500 Index is formed can help you make more informed investment decisions. For example, the technology sector typically trades at a higher price than the S&P 500. Over the past five years, the tech sector has been the only sector to outperform the S&P 500, suggesting that it has pushed the S&P 500 to new highs. One consequence is that the S&P 500 has become more expensive because it has more tech stocks.

The S&P 500's P/E ratio of 27.9 may seem high compared to historical averages. Again, this has less to do with the rest of the market becoming more expensive and more to do with tech stocks driving up the P/E of the S&P 500.

Keeping track of the technology sectorTechnology Select Sector SPDR FundThis means that the P/E ratio for the non-technology portion of the S&P 500 is 23.2, which sounds much more reasonable than 27.9 for the name.

In total, knowing what's going on in the market can help you make informed decisions instead of relying on the numbers in the table.

Underlying market risk

Whether you're new to investing or looking for a low-cost way to invest in the S&P 500, a Pioneer exchange-traded fund (ETF) or index fund is the way to go.

Vanguard S&P 500 ETF (NYSEMKT: VOO)At 0.03%, this is one of the least expensive ways to invest in the Index.

Vanguard Growth ETF (NYSEMKT: VUG)The rate of 0.04%, targeting the faster-growing but higher-priced segments of the market. As a result, more than 55% of the fund is invested in the technology sector.

Vanguard Value ETF (NYSEMKT: VTV)It has a lower P/E ratio and higher yield than the Vanguard S&P 500 ETF because it emphasizes stable, dividend-oriented companies.

If you're looking for a low-cost way to achieve instant diversification, all three funds offer passive market investment strategies.

Changing benchmarks

Because the S&P 500 is often reweighted based on the market capitalization of stock holdings, its composition can change dramatically in a short period of time. The S&P 500 can also become a victim of its own success, as the performance of the technology sector now plays a huge role in the index's performance.

Understanding the components of the S&P 500 can help you properly gauge your performance in the index. If you own a lot of growth and technology stocks, this may be a fair comparison. But if you're more focused on value and income, then the S&P 500 may not be a good benchmark for you.

Should you invest $1,000 in the Vanguard S&P 500 ETF now?

Before buying shares of the Vanguard S&P 500 ETF, consider the following:

Motley Fool Stock AdvisorThe analyst team has just selected what they think is the best name for investors to buy now.10Only ...... and the Vanguard S&P 500 ETF were not included. The 10 stocks that made the list could generate huge returns in the coming years.

Consider April 15, 2005NvidiaOn the list at ...... If you invest $1,000 at the time of our recommendation, theYou'll have $555,209.! * *

Stock AdvisorIt provides investors with an easy-to-learn blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. Stock Advisor The service has contributed to the S&P 500 Index's return since 2002.translate twiceMuch*.

View 10 Gift Certificates

*Stock Advisory Rates as of April 8, 2024

Daniel Foelber does not hold any of the stocks listed above. the Motley Fool holds the recommended S&P Global Index, the Pioneer Index Fund - Pioneer Growth ETF, the Pioneer Index Fund - Pioneer Value ETF and the Pioneer S&P 500 ETF. the Motley Fool has a disclosure policy.

The S&P 500 has just achieved three major milestones. What does this mean for your portfolio?