Russell 2000 Index

What Is the Russell 2,000 Stock Market Index?

The Russell 2,000, otherwise called the "Russell 2K," is a stock market index comprised of small-cap companies. Analysts consider the Russell 2,000 to be a barometer for the financial performance of small U.S. companies.
These companies are by their tendency totally different from the companies that make up a "title" index like the S&P 500, which tracks a portion of the country's greatest names. While investors may not be as familiar with the companies in the Russell 2,000 as they are with those in the S&P 500, when seen together, these indexes give important bits of knowledge on the overall strength of the U.S. economy — at all levels.

How Is the Russell 2,000 Weighted?

The Russell 2,000 is a capitalization-weighted index, and that means that every component is weighted by its market cap, or the total market value of outstanding shares. Different indexes, similar to the Dow Jones Industrial Average, are price-weighted indexes, which rank components in light of share price. Numerous analysts accept that indexes weighted by market cap are more accurate impressions of the market fragments they are tracking.

Which Companies Make Up the Russell 2,000?

The companies that make up the Russell 2,000 are small-cap companies. These companies have a market capitalization between $300 million to $2 billion. To be listed publicly, they have exhibited strength in their annual incomes, cash flow, and public demand for their products.

Who Manages the Russell 2,000 and How Are Its Indexes Structured?

The Russell 2,000 is managed by FTSE Russell Group, which tracks distinct portions of the stock market either by size, (going from large-cap to miniature cap), or by investment style (growth versus value, and so forth.). Its parent index is the Russell 3,000, which consists of the largest 3,000 publicly tradable stocks, or nearly every tradable equity accessible (97%) in the U.S. today.
All of the Russell subindexes "roll up" to the Russell 3,000. For instance:

• The Russell Top 50 Index tracks the 50 greatest companies inside the Russell 3,000
• The Russell 1,000 Index measures 1,000 of the largest stocks inside the Russell 3,000
• The Russell 2,000 Index tracks the 2,000 smallest companies inside the Russell 3,000 index

The Russell 2,000 makes up 10% of the total stock's market capitalization while the Russell 1,000 makes up the other 90%. This truly delineates how a couple of companies can take up the overwhelming majority of market cap on Wall Street!

Might You at any point Invest in the Russell 2,000?

For what reason did Russell classify the market into such countless distinct portions? One explanation was to make it simple for investors to trade them. Since it is unimaginable to expect to invest straightforwardly in a stock market index, mutual funds and ETFs have been intended to mirror the composites inside the distinct Russell index portions to give investors exposure to these markets. It likewise fills in as a benchmark for performance for mutual fund portfolio managers.
The ticker symbol for the Russell 2,000 is RUT, yet since it is a stock market index, you can't invest in shares straightforwardly. Notwithstanding, a couple of instances of mutual funds and ETFs which track this index are the Vanguard Russell 2,000 Fund (VRTIX) and the iShares Russell 2,000 ETF (IWM).

Is the Russell 2,000 Growth or Value?

The Russell 2,000 is a stock market index managed by FTSE Russell. What's more, FTSE Russell has presented growth and value renditions of this index, which are known as the Russell 2,000 Growth and the Russell 2,000 Value Indexes. These are arranged by price-to-book ratios and earnings gauges, individually.

When Does the Russell 2,000 Index Rebalance?

Each May, FTSE Russell rebalances its indexes and assesses a rundown of global stocks for inclusion or erasure, utilizing criteria, for example, size, company structure, and share type. The rundown is then ranked by market cap; the largest 3,000 get added to the Russell 3,000. The rundown is additionally refined by float-adjusted market cap, and "grouped" into the Russell 1,000 and Russell 2,000 indexes.
These changes produce results each June. FTSE Russell likewise includes IPOs a quarterly basis.

The Russell 2,000 versus the S&P 600

The Russell 2,000 is the most notable small-cap market index. S&P Dow Jones Indices additionally deals with an index of small-cap stocks; theirs is known as the S&P 600. Other than contrasting in the number of stocks each index tracks, the S&P 600 breaks down extra factors, for example, liquidity and public float as part of its ranking criteria, notwithstanding market capitalization.

When Was the Russell 2,000 Created?

The Russell 2,000 Index was made by the Frank Russell Company in 1984 and was the principal benchmark index for small-cap stocks. A ton of increases and erasures have occurred from that point forward, yet today, the index celebrates over 30 years of performance and is currently managed by FTSE Russell Group.

What Happens When a Stock Joins the Russell 2,000?

The phenomenon is known as the "Russell Effect." When a company is added to the Russell 2,000, every one of the mutual funds that are benchmarked to the index will automatically purchase it, which ordinarily makes shares soar. Conversely, when a company is erased, shares plunge. Nonetheless, given the transparency of Russell's systems, market analysts can generally anticipate which companies will be added and erased, thus frequently the market factors in these expectations before the reconstitution happens.

Why Invest in the Russell 2,000?

Investing in small-cap companies can be part of a diversified portfolio procedure; as a matter of fact, there is a term for it — the small-cap risk premium. While smaller companies experience greater volatility and more extensive price swings than additional mature companies, they can likewise exhibit dramatically greater growth. As a matter of fact, a fundamental investment paper distributed in 1992 by Eugene Fama and Kenneth French made sense of how small-cap stocks outperform large caps over the long haul. One method for tapping into the positive parts of investing in the small-cap sector is through a mutual fund or ETF that tracks the Russell 2,000 Index, since it is composed of 2,000 companies, subsequently relieving a great deal of the risk that comes with investing straightforwardly in one low market-cap company.

Features

• The index was sent off in 1984 by the Frank Russell Company and is currently managed by FTSE Russell.
• Numerous investors view the index's breadth as giving it an edge over narrower indexes of small-cap stocks.
• The Russell 2000 index is a market index comprised of 2,000 small-cap companies.
• Investors can reproduce the returns of the Russell 2000 Index by investing in an index-based mutual fund, or exchange-traded fund (ETF) that tracks the index.
• The index is habitually utilized as a benchmark for measuring the performance of small-cap mutual funds.

FAQ

How Might I Invest in the Russell 2000?

Ordinary investors can invest in the Russell 2000 by means of index ETFs that track it, like the BlackRock iShares Russell 2000 ETF (IWM) or Vanguard's Russell 2000 ETF (VTWO). There are additionally several Russell 2000 index mutual funds. More sophisticated investors may likewise trade Russell 2000 Index futures contracts.

How Does the Russell 2000 Differ From the S&P 500 Index?

The Russell 2000 is an index that tracks 2,000 small-cap companies, while the S&P 500 tracks five hundred large-cap companies. Thusly, the two contrast in both the number of stocks in the index and the spans of those companies. Along these lines, there isn't a lot of overlap, if any, between the stocks held in each index.Both the S&P 500 and Russell 2000 indexes are market-cap-weighted. Nonetheless, dissimilar to the S&P 500 index, the securities in the Russell 2000 index are not chosen by a committee. All things being equal, the holdings are determined through a formula in light of their market cap and current index participation.

Why Is the Russell 2000 Annual Reconstitution Important?

The Russell 2000 declares changes to the small-cap index among May and June of every year. Since it is closely followed by mutual funds managers and individual investors, speculation regarding which companies will be added can cause a shock in short-term demand.

What Are the Russell 2000's Top Holdings?

As of Q1 2022, the top 10 holdings in the Russell 2000 Index by market capitalization included:1. Ovintiv Inc. (OVV)1. Antero Resources Co. (AR)1. Chesapeake Energy (CHK)1. Southwestern Energy (SWN)1. Range Resources (RRC)1. Biohaven Pharmaceutical (BHVN)1. BJ's Wholesale Club Hdlg. (BJ)1. Avis Budget Group Inc. (CAR)1. PDC Energy (PDCE)1. Willscot Mobile (WSC)

What Are the Small-Cap Subindexes of the Russell 2000?

There are a number of subindexes inside the Russell 2000. The Russell 2000 Value Index tracks the performance of companies with lower price-to-book ratios, which shows a company's market price relative to its balance sheet. The Russell 2000 Growth Index is a subset of companies with higher price-to-value ratios, or those expected to have higher growth values from now on.