Adjusting S&P 500

Q I heard that the S&P 500 recently reorganized itself. What does that mean?

— A.B., Winona, Minnesota

A The Standard & Poor’s 500 index of 500 big companies is adjusted regularly, with some companies being removed from the index while others are added to replace them. For example, Twitter was added to the index in June to replace Monsanto, as Monsanto was being acquired by the German company Bayer and would no longer be a stand-alone company or stock.

The index recently underwent a bigger transformation than usual, though, as it changed how it classifies and groups certain companies. Gone is the Telecoms sector, replaced by a new Communications Services sector. The new sector will contain not only companies that provide various communication platforms but also companies offering media content. Some of its components will be Comcast, AT&T, Verizon Communications, Walt Disney, Facebook, Twitter, Netflix and Google’s parent, Alphabet. The change was made to better classify companies with operations that span both communication channels and content.

The reorganization won’t really affect those invested in the overall S&P 500 index, but if you’ve invested in any funds specializing in various sectors, the holdings in them may well have changed.

Q

What do you think about investing in companies that have filed for bankruptcy protection? Their stocks look cheap — might they not recover and be good investments?

— R.Y., Strasburg,

Virginia

A

It’s best to steer clear of bankruptcies.

Holders of common stock tend to get little or nothing when companies emerge from bankruptcy, while creditors and others might get some pennies on the dollar. These companies also often emerge with new stock, their old stock rendered worthless. Give them some time to perform postbankruptcy before considering investing.