The S&P 500 is a collection of large cap stocks traded on the New York Stock Exchange and NASDAQ. The idea of the index is that they select large companies from across a broad range of markets and sectors to try to emulate the rise and fall of the market as a whole.

You can purchase funds from investment companies, i.e. Vanguard, that are made up of stocks in the S&P 500 index.

By doing this you more or less will see a return similar to what the market is doing a whole. And since generally markets rise over time (7% on average) you will see profit over a longer period of time.

Warren Buffet is a huge fan of these index funds. He recently did a $1 million challenge. He said he would pick the cheapest Vanguard index fund and put it up against one of the best hedge fund managers in the US. And funny enough how index fund out performed the hedge fund drastically. 85% return vs. 22%!