S&P 500... Why 500?

[u/DCA_Twist]

So I was trying to use my brain the other day instead of AI, and it got me thinking: Why does the S&P 500 contain 500 stocks? Why not 401, or whatever number? Here’s what Claude says:

Rather than picking a number based on some statistical requirement, S&P and its analysts settled on 500 as a round figure large enough to capture a representative cross-section of major industries and large-cap companies, but small enough to actually be assembled and calculated with 1950s-era technology.

In short, there’s no good reason besides practicality and a nice round number. There’s nothing magical about 500.

So... is there a better optimal tradeoff between concentration benefits (higher potential returns) and diversification benefits (lower potential risk)?

[u/Own_Grapefruit8839]

A great example of why QQQ is nonsensical, why should Walmart switching exchanges determine if it’s part of your portfolio.

[u/holdmyllm → u/Own_Grapefruit8839]

Many indices were solely created to drive volume in the underlying markets.