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An Overview on the S&P 500 and Why You Should Pay Attention to It

The Standard and Poor 500(S&P) is a market index that is derived from the 500 most sought-after stocks in the NASDAQ and NYSE in the US stock market. It is designed to reflect the risk and return aspects of various stocks in the stated market. The S&P 500 high-low Index, on the other hand, depicts the new highs and new lows encountered on the S&P 500 stocks within the past 52 week period. The index is obtained by dividing the high and low stock values with the total trade volumes within the same interval. Many investors use this indicator on CMC Markets to determine the value of a given stock and to predict its future performance.

Relevance of the S&P Index

While there are several indices that characterize the country’s economic status, the S&P 500 is among the most popular seeing as it offers a broad outlook of the stock market. Finance professionals and traders search for index tools such as the S&P 500 to enable them to control their investments. It is important to note that indexes are interconnected though and because of this, they often move in a similar direction.

Companies in the S&P 500 index for instance move in the same manner as those in the DJIA seeing as both indices cover bigger and lower risk companies. The same applies to the smaller, high-risk companies covered under AMEX and NASDAQ. Note however, since S&P covers close to 70 percent of the total value of the market, it gives a more precise gauge of the market than the Dow Jones does. Nonetheless, if you are looking to invest in the S&P 500, it is important to first evaluate your portfolio and then pick a something that matches it.

Other than giving direction on performance of the market, the S&P also helps in identifying trends and reflecting fluctuations. Despite the fact that the index does not depict the real performance of the total market, it shows the associated risks, and this certainly plays a significant role in increasing or decreasing investor trust.

Application of the S&P 500 in trading

The S&P 500 index gives investors a clear perspective on how the stocks have performed within a particular time frame and with this, they are able to make better investment decisions .This denotes that even an investor who is uncertain about where to invest can apply the indices in selecting the specific stocks to buy. This also gives them a better chance to perform on the same level with the market and avoid underperforming.

On top of that, the index offers a yardstick through which any stock trader can evaluate the performance of their portfolios. This makes it possible for them to find out how well or not their managers are performing with reference to managing of their portfolio, hence their money. The issue of forecasting also comes into play here; by getting to learn the past performance of the index, it becomes easier to predict market trends. All the same, the numbers themselves are not important, what matters is the change in percentage over the prolonged 52 week period as this is what gives an actual indication of whether the market is climbing or falling.

S&P 500 Index: The Bottom Line

The highest and lowest values that a stock trades at in a given year go a long way into providing solid information on the movement of the market after that, and this essentially reinstates the relevance of indexes such as S&P 500 in stock trading. The S&P 500 index indicates how much investors are ready to put in to acquire particular stock based on the expected trends. In general, however, the index goes up when there’s stability and decreases when the economy fluctuates. In connection with this, high low index values above 50 are linked to low levels of volatility while figures below 50 indicate volatility.

Most investors prefer to invest when the price of a stock surpasses the 52 week high and to sell when this figure goes below the 52 week low. By investing at such points, stock traders trust they will have adequate momentum to maintain price movement in a positive direction. On the contrary, other investors sell once the price peaks within the 52 weeks with the hope that it will reduce, or buy at a 52 week low based on the assumption that the value will climb.
Regardless of the case, the most important thing for an investor to do is to understand not just the weightings for the S&P 500, but the selection of stocks as well. It is also essential to be flexible with regard to the changes that may crop up in the stock market as it is only then that funds can be invested and reinvested within reasonable periods.

The Implications of Social Security Decisions

There are few investments that guarantee a good annual growth. One that does is the Social Security System where deferring benefits from the youngest age they can be taken, 62, to the latest, 70, ensures monthly benefits are much higher. There is therefore a strong case for that deferment where possible. People who have made little in the way of providing for retirement may be desperate and forced into claiming. What are the facts?

Look at the Figures

The official retirement age for those born from 1960 onwards is 67, although benefits are available at 62. If you need to draw at 62, your benefits will reduce by 30%. If you can delay until 70, the increase is 30%. Quite an increase and surely a compelling reason for deferment?

One argument of taking benefits at 62 is that recipients get 12 checks extra per year for each year until someone deferring actually starts to receive anything. Something else to consider however is once someone starts to claim, that sets the amount any dependents will subsequently receive on the death of that person.

Life Expectancy

Life expectancy is a major factor to consider. People in good health are increasingly living past 80 and beyond. Potentially many can expect to be drawing benefits for 20 years. Likewise dependents will perhaps need benefits for a longer period than in the past.

It is a matter of personal choice whether you believe that the total amount you will receive as an individual will amount to about the same whether you take the smaller sum early but benefit for those extra years. In the end no one can predict how long they will live and whether the extra 96 checks at the lower rate, and future ones at that rate will total the amount of the increased monthly amount multiplied by an indeterminate number of years.

There may be a case if parents and grandparents lived a long and healthy life then you can reasonably expect to do likewise. That being the case, do your calculations and decide based on what the figures show. Those who expect to reach 80 will probably receive more by deferring.

Will Money be Tight?

A long life is great as long as you are relatively healthy. The problem comes when money becomes tighter. The figures of average retirement funds held by individuals are surprising low, and frankly disappointing. The average fund of those within 10 years of retirement is less than $80,000. That represents only about $3,000 per year to add to the Social Security payment. That is rarely enough to live on, and certainly not comfortably.

There are several adjustments to be made in retirement and many are no-financial. Social interaction is perhaps an umbrella description of some because the work environment no longer exists; routine has to change. It is an argument for delaying retirement as long as you enjoy your job and are healthy enough to do it. If you do your benefits can be deferred anyway.

Create the Right Environment

Retirement is a reality; a bit like death and taxes! What does not have to be a reality is a struggle in retirement. Statistics on saving, retirement provision and on the other side the level of domestic debt in society are quite disturbing. Whatever your age you should spend some time thinking about your personal financial situation. If you have significant debt then you need to devise a way to pay it off. Mortgages are generally excluded from this because they should be working positively for you. They most certainly include debts on credit cards because balances incur a high level of interest each month.

realistic loans are cheaper and can actually be categorized as positive debt if they are used to pay off credit card problems. You will be taking positive action which will actually save you money.

Only when you are in control of your finances will you be able to make positive moves to save for the future in whatever form you decide. Whatever the subjective decision on when to take benefits in the future, wouldn’t it be great to be able to decide without the factor of desperation coming into it? It can be done as long as you remain employed with a regular income.