It goes to the stocks in that index relative to their market capitalization weight. I had thought about this awhile but never researched it myself.
When investors invest directly in the S&P 500 index, their money typically goes into a fund that is designed to track the performance of the S&P 500 index. These funds are known as index funds or exchange-traded funds (ETFs) and they are managed by financial institutions such as Vanguard, BlackRock, and State Street.
When an investor purchases shares of an S&P 500 index fund, their money is used to purchase shares of the companies in the index in proportion to their market capitalization. For example, if the market capitalization of a company in the index is 2% of the total market capitalization of all the companies in the index, then 2% of the investor's money will be used to purchase shares of that company.
As the companies in the index earn profits and pay dividends, the index fund receives a proportional share of those profits and dividends. Additionally, as the market value of the companies in the index changes, the value of the shares held by the index fund will also change. When an investor sells their shares in the index fund, the proceeds from the sale are paid to the investor, minus any fees or expenses associated with the fund.
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