Stock indices explained: what the S&P 500, Dow and MSCI ACWI measure

A stock index is one number that tracks the prices of a basket of shares. What it measures depends on two choices: which companies get in, and how much each one counts.

Indices that weight by company size, by equal shares or by share price can move by different amounts, or even in opposite directions, on the same day.

Broad indices at a glance

S&P 500 figures are as of 31 July 2026 and MSCI ACWI figures as of 30 September 2026, from each provider's factsheet. Each index's level is a number of points, not a price you pay.

Three ways to weight an index

Market-value weighting: bigger companies count more

Each company counts in proportion to its free-float market value. That is its share price times the shares free to trade, leaving out stakes that big owners hold long term. Most broad indices work this way.

So a move in one very large company can push the index more than moves in fifty small ones. On 31 July 2026, the 10 largest S&P 500 members made up 37.6% of the index, and the largest alone 7.6%. One sector, information technology, was 36.8%.

Equal weighting: every company counts the same

At each rebalance, every company gets the same weight. In the S&P 500 Equal Weight index, that is 1/500, or 0.2% each, reset every quarter. A 10% jump in the smallest member moves the index as much as a 10% jump in the biggest.

Weights drift between rebalances as prices change. Resetting them means selling recent winners and buying laggards, which costs trading. From the second quarter of 2024 to the first quarter of 2026, the equal-weight index replaced an average of 5.83% of its holdings each quarter, against 0.92% for the standard S&P 500 (Tema, April 2026).

Price weighting: expensive shares count more

The Dow adds up the share prices of its 30 members and divides by a "divisor". A company with a $500 share counts ten times as much as one with a $50 share, whatever their size. On 29 June 2026, the divisor was about 0.168, so a $1 move in any member moved the Dow by about 5.94 points.

Worked example: same day, three answers

A made-up market of three companies, not market data:

• Market-value weighted: 60% × −4% + 30% × 2% + 10% × 10% = −2.4% + 0.6% + 1.0% = −0.8%.
• Equally weighted: (−4% + 2% + 10%) ÷ 3 = +2.7%.
• Price weighted: prices add up to $450 before and $48 + $306 + $110 = $464 after, so 464 ÷ 450 − 1 = +3.1%.

Same shares, same day. One index is down, two are up.

How companies get in, and how often it changes

S&P 500. As of July 2026, a company must be a US company with a total market value of at least $22.7 billion. It needs positive earnings in its latest quarter and over its latest four quarters added together. It must also pass tests on how much of it is free to trade and how actively it trades. A committee makes the final choice and also weighs sector balance, so meeting the rules doesn't guarantee a place.

Dow. There are no fixed size rules. A committee chooses 30 large, well-known US companies and replaces one when it sees fit.

MSCI World and ACWI. MSCI sorts countries into developed and emerging markets, then includes the large and mid-sized companies in each by rules on size and free float.

Total-market indices take in nearly every listed company in a country, from the largest to very small ones.

When membership changes, funds that track the index must buy the new member and sell the old one, often on the same day.

Why indices move differently on the same day

• Weighting. A few giant companies drive market-value indices. Equal-weight indices give hundreds of smaller companies the same vote.
• Different companies. The Dow holds 30 companies; a total-market index holds thousands, including small ones whose prices can swing more when liquidity dries up.
• Different countries. On 30 September 2026, US companies were 64.21% of the MSCI ACWI. The rest of the world can have a very different day.

Over a year, the gaps add up. In calendar 2025, the S&P 500 price index rose 16.39%. With dividends reinvested, net of tax, the MSCI World rose 21.09%, the MSCI ACWI 22.34% and the MSCI Emerging Markets 33.57%. In 2022 they fell together: −19.44%, −18.14%, −18.36% and −20.09%.

Price index vs total-return index

A price index tracks prices only. When a company pays a dividend, its share price usually drops by about that amount, and the price index never adds the cash back. A total-return index assumes every dividend is reinvested.

For 2025, the S&P 500 price index rose 16.39%, while NYU Stern's series with dividends shows 17.78%. That gap of about 1.4 points a year compounds over decades. MSCI's "net" figures above include dividends after withholding tax.

How to use an index as a yardstick

A fund's results only mean something next to the right benchmark. Match the index to what the fund holds:

Example (made-up fund, not market data). Say a global fund is up 18% this year. Next to a US index up 15%, it looks 3 points ahead. Next to the MSCI ACWI up 21%, it is 3 points behind. The right comparison is the second one.

An index fund tries to match its index rather than beat it. A mutual fund's documents name its benchmark: check it, and check whether it is a price or total-return version.

Try it with your numbersInvestment GrowthSee how investing a fixed amount every month could grow your wealth over time.

What indices don't tell you

• Your own return. Fund fees and taxes come off your result, not the index's. A price index also leaves out dividends.
• Value in your currency. These indices are quoted in US dollars. If your own currency moves against the dollar, your result differs.
• Whether a company is good. Indices rank by size and trading, not quality. Membership is not a seal of approval.
• How concentrated you are. A broad name can hide a few dominant companies or one dominant sector or country. Equal weighting gives more diversification across companies, with more exposure to smaller ones.
• What comes next. Past index moves don't predict future ones.

Your plan

1. Pick three indices from the table and look up today's move for each on a financial news site.
2. Compare the moves. Decide whether a day was led by a few giants or was broad.
3. Find your fund's benchmark in its documents. Check that it matches what the fund holds.
4. Compare like with like. Use total-return figures for both sides, over a year or more, not a week.
5. Check concentration. Read the index factsheet for its top 10 weight and its largest sector and country.

What to watch out for

• Headlines that quote one index. "The market" often means one country's large companies.
• Unfair comparisons. A total-return result next to a price index flatters; a small-company fund next to a large-company index misleads.
• Hot runs. A strong year for one weighting style or region is not a forecast.

This guide is for education only. It is not advice to buy or sell any share, fund or index product.