Russell 3000 Growth Index
What Is the Russell 3000 Growth Index?
The Russell 3000 Growth Index is a market capitalization-weighted index based on the Russell 3000 index. The Russell 3000 Growth Index incorporates companies that display indications of above-average growth. The index is utilized to provide a measure of the performance of growth stocks in the United States.
Understanding the Russell 3000 Growth Index
Russell US Indexes are benchmarks that institutional investors follow closely. Six major types of institutional investors include:
- Endowment reserves
- Commercial banks
- Mutual assets
- Hedge reserves
- Pension reserves
- Insurance companies
These metrics allow this group of investors with access to extraordinary financial assets and the ability to invest large amounts of cash to follow current and historical market performance by a particular size, investment style, and an extensive variety of extra market qualities. The major Russell 3000 Index likewise incorporates the large-cap Russell 1000 Index and small-cap Russell 2000 Index.
Companies inside the Russell 3000 that exhibit higher price-to-book (P/B) and anticipated earnings are utilized to form the Russell 3000 Growth Index. Price-to-book compares a stock's current market value to its book value (generally calculated as total assets minus intangible assets, like patents and goodwill, alongside liabilities). This is otherwise called the "price-value ratio."
Extra screens inside the Russell 3000 Index incorporate the Russell 1000 (comprised of the top 1000 companies in the Russell 3000) and the Russell 2000 Index (comprised of the leftover 2000 companies).
Pink sheets, bulletin board stocks, foreign stocks, or American Depository Receipts (ADRs) are excluded from every one of the three of these indexes. These securities frequently trade with less liquidity and with a sufficiently low volume that it is challenging for investors with parameters to invest just above a certain amount to get into these markets.
For example, while a particular over-the-counter or OTC security might be of an interest to certain endowments, the endowment policy might prohibit the endowment managers from investing below a certain dollar threshold in securities that trade below a certain number of shares per day on average. Such securities frequently pose more risk.
Russell 3000 Growth Index and Growth Stocks
Examples of growth stocks that could comprise the Russell 3000 Growth Index incorporate technology companies. These fast-developing firms (frequently startups) don't necessarily pay a dividend, given that management normally opts to reinvest retained earnings in capital projects. Consequently, growth investors pick growth stocks based on the potential for capital gains, not dividend income.
Another common example is biotech companies. They will typically either explode upwards or fail outright, but their trajectory and business size positions them as a decent candidate for growth.
Features
- The index is a subset of the broad Russell 3000 Index, which represents both large-cap and small-cap companies.
- The Index's broad exposure to various sectors means it generally doesn't see large vacillations frequently associated with growth stocks.
- The Russell 3000 Growth Index is comprised of companies strategically situated for fast growth.
