How to calculate P/E ratio for S&P500 sectors
"To calculate a sector (or index) P/E ratio you need to sum the market caps of the constituent stocks and divide it by the sum of the total earnings of the constituent stocks (including stocks that have negative earnings).  There are no ""per share"" figures used in the calculation. Beware when you include an individual stock that there may be multiple issues associated with the company that are not in the index.... eg. Berkshire Hathaway BRK.B is in the S&P 500 but BRK.A is not.  In contrast, Google has both GOOGL and GOOG included in the S&P 500 index but not its unlisted Class B shares.  All such shares need to be included in the market cap and figuring out the different share class ratios can be tricky." "For the S&P and many other indices (but not the DJIA) the index ""price"" is just a unitless number that is the result of a complicated formula.  It's not a dollar value.  So when you divide said number by the earnings/share of the sector, you're again getting just a unitless number that is incomparable to standard P-E ratios. In fact, now that I think about, it kinda makes sense that each sector would have a similar value for the number that you're computing, since each sector's index formula is presumably written to make all the index ""price""s look similar to consumers."
Use a compound interest calculator to project the difference with ETFs in the S&amp;P 500 (or the asset mix of your choosing), and subtract the expected pension amount. If the difference is positive, or around around even, I would do it to avoid the risk of company failure. S & P's site has a methodology link that contains the following which may be of use: Market Capitalization. Unadjusted market capitalization of US$ 4.6   billion or more for  the S&P 500, US$ 1.2 billion to US$ 5.1 billion   for the S&P MidCap 400, and US$ 350  million to US$ 1.6 billion for   the S&P SmallCap 600. The market cap of a potential  addition to an   index is looked at in the context of its short- and medium-term   historical  trends, as well as those of its industry. These ranges are   reviewed from time to time to  assure consistency with market   conditions.  Liquidity. Adequate liquidity and reasonable price – the   ratio of annual dollar value  traded to float adjusted market   capitalization should be 1.00 or greater, and the company  should   trade a minimum of 250,000 shares in each of the six months leading up   to the  evaluation date.  Domicile. U.S. companies. For index purposes,   a U.S. company has the following  characteristics:  The final determination of domicile eligibility is made by the U.S.   Index Committee. "What you need to do is go to yahoo finance and look at different stock's P/E ratios. You'll quickly see that the stocks can be sorted by this number. It would be an interesting exercise to get an idea of why P/E isn't a fixed number, how certain industries cluster around a certain number, but even this isn't precise. But, it will give you an idea as to why your question has no answer. ""Annual earnings are $1. What is the share price?"" ""Question has no answer""" Dow Jones: http://en.wikipedia.org/wiki/Historical_components_of_the_Dow_Jones_Industrial_Average  NASDAQ: http://en.wikipedia.org/wiki/NASDAQ-100 (scroll down) S&P Tricky. From what I can find, you need to be in Harvard Business School, a member of CRSP, or have access to Bloomberg's databases. S&P did have the info available years ago, but no longer that I can find. The equation you show is correct, you've simply pointed out that you understand that you buy at the 'ask' price, and later sell at the 'bid.' There is no bid/ask on the S&P, as you can't trade it directly.  You have a few alternatives, however - you can trade SPY, the (most well known) S&P ETF whose price reflects 1/10 the value or VOO (Vanguard's offering) as well as others. Each of these ETFs gives you a bid/ask during market hours. They trade like a stock, have shares that are reasonably priced, and are optionable.  To trade the index itself, you need to trade the futures. S&P 500 Futures and Options is the CME Group's brief info guide on standard and mini contracts.  Welcome to SE. From Wikipedia -  To calculate the value of the S&P 500 Index, the sum of the adjusted   market capitalization of all 500 stocks is divided by a factor,   usually referred to as the Divisor. For example, if the total adjusted   market cap of the 500 component stocks is US$13 trillion and the   Divisor is set at 8.933 billion, then the S&P 500 Index value would be   1,455.28. From a strictly mathematical perspective, the divisor is not canceling out the units, and the S&P index is dollar denominated even though it's never quoted that way. A case in point is that the S&P is often said to have a P/E, and especially an E, the earnings attributed to one 'unit' of S&P. And if you buy a mutual fund sporting a low expense ratio, you can invest exactly that much money (the current S&P index value) and see the dividends accrue to your account, less the fee. The intrinsic value of a company is based on their profits year on year along with their expect future growth. A company may be posting losses, but if the market determines there's any chance they will turn a profit one day, or be a takeover target, it assigns value to those shares. In normal times, you'll observe a certain P/E range. Price to earning ratio is a simple way to say the I will pay X$ for a dollar's worth of earnings. A company that's in a flat market and not growing may command a P/E of only 10. Another company that's expanding their products and increasing market share may see a 20 P/E. Both P/Es are right for the type of company involved. "This page from simplestockinvesting.com gives details of total returns for the S&P500 for each decade over the last 60 years, including total returns for the entire 60 year period. It is important to understand that, from an investors point of view, the total return includes both the change in index value (capital gain) plus dividends received.  This total then needs to be adjusted for inflation to give the ""total real return"". As noted in the analysis provided, 44% of the total return from the S&P500 over the last 80 years comes from dividends.  For the DowJones30, this site provides a calculator for total returns and inflation adjusted total returns for user selected periods. Finding comparable analysis for the NASDAQ market is more difficult.  The NASDAQ market site provides gross values for total returns over fixed periods, but you will then need to do the arithmetic to calculate the equivalent average annual total returns.  No inflation adjusted values for ""real"" returns are provided, so again you will need to combine inflation data from elsewhere and do the arithmetic." tl;dr- libor plus a small (&lt;50bps) spread for S&amp;P500 exposure. larger spread for less liquid/ more esoteric index.   a swap is basically just outsourcing balance sheet to a dealer bank. the counterparty (dealer) is shorting you (the fund) the return of the index. to hedge their short, the dealer would borrow funds and buy the stocks in the index. large dealer banks can borrow at basically libor. they'll also expect compensation for the transaction costs of buying the hedge plus a profit on the (small amount) of capital they need to finance this transaction. this will vary based on the size of the portfolio.   s&amp;p500 costs maybe 5bps in transaction cost. an EM index costs maybe 50bps. so it will depend on the index.  profit to the dealer depends on supply/demand dynamics. sometimes this transaction will be in demand, sometimes the short side will be more valuable.   so it depends on the index you're talking about as well as market dynamics. right now for s&amp;p500 exposure, not more than libor plus 50 for a mid-sized fund. "The graphing tools within Yahoo offer a decent level of adjustment. You can easily choose start and end years, and 2 or more symbols to compare.  I caution you. From Jan 1980 through Dec 2011, the S&P would have grown $1 to $29.02, (See Moneychimp) but, the index went up from 107.94 to 1257.60, growing a dollar to only $11.65. The index, and therefore the charts, do not include dividends. So long term analysis will yield false results if this isn't accounted for.  EDIT  - From the type of question this is, I'd suggest you might be interested in a book titled ""Stock Market Logic."" If memory serves me, it offered up patterns like you suggest, seasonal, relations to Presidential cycle, etc. I don't judge these approaches, I just recall this book exists from seeing it about 20 years back." My logic for prices was this: S&amp;P500/indexes price is based on the overall market for S&amp;P500, generally. So my thought was that it should be correlated to the price of the Vix because as market volatility occurred, the price of the Vix would go up and vice Versa when the market goes down. However, I just started running these analyses as a side project and am still learning the right measures to make better observations. So I'm all for any advice in that regard. With the disclaimer that I am not a technician, I'd answer yes, it does. SPY (for clarification, an ETF that reflects the S&P 500 index) has dividends, and earnings, therefore a P/E and dividend yield. It would follow that the tools technicians use, such as moving averages, support and resistance levels also apply.  Keep in mind, each and every year, one can take the S&P stocks and break them up, into quintiles or deciles based on return and show that not all stock move in unison. You can break up by industry as well which is what the SPDRs aim to do, and observe the movement of those sub-groups.  But, no, not all the stocks will perform the way the index is predicted to.  (Note - If a technician wishes to correct any key points here, you are welcome to add a note, hopefully, my answer was not biased) One thing to keep in mind when calculating P/E on an index is that the E (earnings) can be very close to zero.  For example, if you had a stock trading at $100 and the earnings per share was $.01, this would result in a P/E of 10,000, which would dominate the P/E you calculate for the index.  Of course negative earnings also skew results. One way to get around this would be to calculate the average price of the index and the earnings per share of the index separately, and then divide the average price of the index by the average earnings per share of the index. Different sources calculate these numbers in different ways.  Some throw out negative P/Es (or earnings per share) and some don't.  Some calculate the price and earnings per share separate and some don't, etc... You'll need to understand how they are calculating the number in order to compare it to PEs of individual companies. "When margin is calculated as the equity percentage of an account, the point at which a broker will forcibly liquidate is typically called ""maintenance margin"". In the US, this is 25% for equities. To calculate the price at which this will occur, the initial and maintenance margin must be known.  The formula for a long with margin is: and for a short where P_m is the maintenance margin price, P_i is the initial margin price, m_i is the initial margin rate, and m_m is the maintenance margin rate.  At an initial margin of 50% and a maintenance margin of 25%, a long equity may fall by 1/3 before forced liquidation, a short one may rise by 50%. This calculation can become very complex with different asset classes with differing maintenance margins because the margin debt is applied to all securities collectively." If you are interested in this stuff, S&amp;P produce a sovereign rating methodolgy, in which they will tell you exactly what factors they look at.  Once you read this, you can obtain their latest rating report on India and Spain to understand how they applied said methodology in each case. (Not sure if this is free)