In fact, more than one-third of companies in the S&P 500 are classified as either information technology or communications services companies. In the case of the S&P 500, the top companies largely fall into the technology industry and include companies like Apple, Microsoft, Facebook, and Google. “The largest stocks don’t make up nearly as much of the index as you might see with the S&P 500 or the Russell 1000.” The key difference between the Russell 2000 versus the Russell 1000 or the S&P 500 is that while the Russell 2000 represents the small cap equities market, the Russell 1000 and S&P 500 represent the large cap equities market.Īs a result, the Russell 2000 is “much more diversified,” Donohue said. large cap equities market, is made up of 500 of the largest publicly traded U.S. The S&P 500, largely considered the best indicator of the U.S. The other index it’s important to discuss is the S&P 500, which is likely the most well-known stock index. The Russell 1000 is made up of the 1000 largest companies in the larger index, and the Russell 2000 is made up of the 2000 smallest. The Russell 3000 then breaks down into two smaller indices: the Russell 1000 and the Russell 2000. Think of it as a snapshot of the stock market as a whole. The Russell 3000 is a stock index that tracks the performance of the broad stock market, representing roughly 98% of the U.S. First, let’s talk about how the Russell 2000 relates to the larger Russell 3000 index.
The Russell 2000 is just one of many stock indices in the market. The Russell 2000 includes companies from 11 different industries, with the most prevalent being healthcare, financials, industrials, consumer discretionary, and technology.
It should be noted that while it includes 2,000 stocks, given the small cap nature of those stocks, it only represents about 10% of the market capitalization of the broader Russell 3000 index.” “It is considered a good indication of the entire small capitalization universe. stock market,” said Robert Johnson, a professor of finance at the Heider College of Business at Creighton University. “The Russell 2000 is a proxy for the small capitalization sector of the U.S. It’s a smaller subset of the Russell 3000, which is a measure of the broad stock market. According to the index’s factsheet, its goal is to “provide a comprehensive and unbiased small-cap barometer.” The market cap refers to the total value of a given company’s total shares of stock. A small cap stock is a company with a market capitalization less than $2 billion. The Russell 2000 is a stock index that tracks 2,000 small cap companies in the United States. Keep reading to learn more about the Russell 2000 index, how it compares to other stock indices, and how you can add it to your investment portfolio. “With innovations over the last several decades and the growth of ETFs and index funds, decreased commission costs, and increased market liquidity, it’s become easier to get access to this index, which I think is an important part of a diversified portfolio,” said Ford Donohue, a Chartered Financial Analyst and Director at Homrich Berg Wealth Management. As part of an investing portfolio that also gives you exposure to broader indices, some financial experts recommend taking a look. That’s what you get with the Russell 2000 Index, a low-cost fund that tracks the performance of 2,000 small-cap companies on the stock market. When it comes to the stock market, big companies like Apple and Tesla tend to dominate the headlines.īut there are thousands of small companies that can add growth and diversification to your investments - for cheap. For more information, see How We Make Money. Some links on this page - clearly marked - may take you to a partner website and may result in us earning a referral commission. We want to help you make more informed decisions.
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