Russell 2000 Index | Definition and Investment Options

The Russell 2000 Index, also known as Russell 2K, is a stock market index that tracks the performance of 2,000 small-cap companies on the US stock market. It is a subset of the broader Russell 3000 Index, covering approximately 98% of investable US stock markets.

As a key economic indicator, the Russell 2000 focuses on smaller US companies and is often cited alongside other popular stock market indexes such as the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average.

The Russell 2000 Index in a nutshell

  • The Russell 2000 Index tracks 2,000 small-cap US companies, making it a subset of the Russell 3000 Index.
  • Top companies in the index include Ovintiv, AMC Entertainment, and others.
  • Accessible through ETFs and mutual funds, such as iShares Russell 2000 and Vanguard Russell 2000.

Understanding the Russell 2000 Index

The Russell 2000 Index, launched in 1984 by the Frank Russell Company and now managed by FTSE Russell, is a market capitalization-weighted index tracking the performance of around 2,000 small-cap companies. The index evaluates the market capitalization of each company to determine its importance within the index. As the stock of a company moves, its weighting within the index is adjusted accordingly.

Active investors use this index in the small-cap sector to measure their performance. For example, investors who invest in small-cap funds can compare the performance of their fund with that of the Russell 2000. This helps to evaluate the effectiveness of the fund’s active strategy in adding value.

Small-Cap Companies in the Russell 2000 Index

Small-cap companies make up the Russell 2000 Index and represent companies with a lower market capitalization than in larger indices such as the S&P 500 and the Dow.

In the Russell 2000, the median market capitalization of a company stands at approximately $1.03 billion, according to data provided by FTSE, the index’s manager. This figure contrasts with the median market capitalization of $2.28 billion for the broader Russell 3000 index.

Below is a list of the top 10 companies currently comprising the Russell 2000 as of February 2022:

  1. Ovintiv (OVV)
  2. AMC Entertainment (AMC)
  3. Tenet Healthcare (THC)
  4. Synaptics (SYNA)
  5. BJ’s Wholesale Club (BJ)
  6. Tetra Tech (TTEK)
  7. Lattice Semiconductor (LSCC)
  8. Performance Food Group (PFGC)
  9. Macy’s (M)
  10. Chesapeake Energy (CHK)

Investment Options

The Russell 2000 is easily accessible through mutual funds and exchange-traded funds, offering investors a range of options at minimal cost.

Russell 2000 ETF

iShares Russell 2000 is a popular ETF that offers investors diversification with a small-cap universe for a 0.19 fee percentage. Another ETF is the Vanguard Russell 2000 ETF, which comes with an expense ratio of 0.10%.

FAQs – Most frequently asked Questions

What is the difference between Russell 2000 and the Russell 1000?

Russell 2000 and Russell 1000 represent the large Russell 3000 index segments. 20000 large companies make Russell 2000 whereas 1000 large companies make Russell 1000. 

Is Russell 2000 a good investment?

It is advised to invest in Russell 2000 as it can help you gain a better experience in the US small-cap market. Along with other securities, it can provide diversification. 

About the author

Percival Knight
Percival Knight is an experienced Binary Options trader for more than ten years. Mainly, he trades 60-second trades at a very high hit rate. My favorite strategies is by using candlesticks and fake-breakouts

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