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Answer:
Dear
BuyandHolder,
Your
accountant is right-- so you might want to stick with
him!
Recent
S&P 500 News
In
fact, Standard & Poor's just announced that it will
be replacing Delta Air Lines (DAL) with Public Storage
(PSA). The reason cited: the Atlanta-based company
is suffering from diminished market capitalization
-- down to about $200 million. At the time of the
announcement, Delta shares had fallen to an all-time
low and there was concern that the airline might seek
bankruptcy protection -- even though it has undergone
a major restructuring in an effort to slash costs
and deal with rising oil prices.
The
replacement stock, Public Storage, is a real estate
investment trust based in Glendale (CA) that invests
in self-service storage facilities as well as in commercial
and industrial properties. Click HERE
to read a previous column on REITs.
About
The Index
The
S&P 500 Index consists of 500 companies representing
a very wide range of industries. Contrary to popular
opinion, it is not simply a list of the country's
500 largest companies in terms of market capitalization
or revenues.
Instead,
the 500 common stocks are chosen by the S&P Index
Committee. The committee is made up of analysts
and economists who work at the New York-based Standard
& Poor's Corporation which in turn is a subsidiary
of Mc Graw-Hill.
S&P
literature states that "leading companies in leading
industries" is the overall basic criteria for being
included in the index. More specifically, the selection
is based on three factors: a company's market size,
its liquidity and its industry group representation.
It is one of the most commonly used benchmarks of
the overall U.S. stock market.
It's
important to realize that the index is a market-capitalization
index. The Motley Fools have come up with the
clearest definition of market cap for non-economists:
"Think of market cap as the price you would pay to
buy all shares of a single company." That means each
stock's weight in the index is proportionate to its
market value.
Keeping
Up With Changes
One
way to monitor your personal portfolio is to know
when a stock is deleted or added to the index. You
can do this by regularly checking the announcements
at: www.standardandpoors.com.
On the left-hand side menu, click on "Indices Changes."
A
Word About The Fortune 500
All of the stocks in the S&P 500 are large and publicly
traded -- on the major exchanges and Nasdaq. On the
other hand, the Fortune 500 includes the 500 largest
U.S. companies based on gross revenues, regardless
of whether they are publicly or privately held, and
without any adjustment or consideration for contributing
to a wide industry representation.
BUYandHOLD
does not recommend any securities. The securities
mentioned above are being used for illustrative and
informational purposes only and should not be regarded
as an offer to sell or as a solicitation of an offer
to buy.
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