ABCS of S&P 500

QWhat’s the S&P 500 that I see referred to everywhere?

AThe Standard & Poor’s 500 Index is a list of 500 of America’s biggest companies, with a median market value of around $21.5 billion. You’ll see the term “S&P 500” all over the financial world because it’s often used as a proxy for the entire U.S. stock market, or at least for the universe of large companies. Together, the companies make up about 80% of the value of the total U.S. stock market.

The index is full of familiar names, such as 3M, Amgen, Apple, Best Buy, Chipotle Mexican Grill, Coca-cola, Costco, CVS Health, Dollar Tree, Facebook, Ford, IBM, Johnson & Johnson, Kroger, Lowe’s, Microsoft, Netflix, Nike, Pepsico, Starbucks, Target, Walmart and Xerox, along with some less familiar ones.

It’s useful to compare your own investments’ performance with that of the S&P 500. If you’re not beating the S&P 500 over several years, consider just investing in a low-fee S&P 500 index fund instead, such as the Vanguard 500 Index Fund (VFINX) or the SPDR S&P 500 ETF (SPY). Index funds outperform the vast majority of actively managed mutual funds — in part due to lower fees — and they’re great long-term options for all kinds of investors.

Learn more about index funds at Fool.com and Investor.gov; you can find the Fool’s guide at Mot.ly/investing-index-funds.

QWhat’s a good book to introduce me to investing? — A.K., Hackensack, New Jersey

AHere are some good ones: Peter Lynch’s “Learn to Earn” (Simon & Schuster, $18), John Bogle’s “The Little Book of Common Sense Investing” (Wiley, $25) and “The Little Book That Still Beats the Market” by Joel Greenblatt (Wiley, $25).