What is the Russell 2000 Index?
Written by True Tamplin, BSc, CEPF®
Updated on January 11, 2021
Russell 2000 Index Definition
The Russell 2000 is a market-cap weighted index that bases its weighting on shares outstanding.
Frank Russell started the Index in 1984.
It primarily focuses its attention on 2,000 of the US’s small-cap companies and is the standard for any investor looking to invest in small-cap companies.
Defining Russell 2000 Index in Simple Terms
The Russell 2000 Index is made up of the smallest 2000 companies in the Russell 3000 Index, which tracks about 98% of the U.S.’s publicly traded stock.
Similar to the Russell 2000
The Russell 2000 shares a lot of similarities with the S&P 500.
Both are market-weighted indexes, and base their weighting on outstanding shares.
In fact, it could be said that the Russell 2000 is to small-cap investors what the S&P 500 is for large-cap investors.
The Purpose of the Russell 2000
In other words, it is the most popular and widely looked to authority on the status of America’s small-cap companies.
As a result, the Russell 2000 is often looked to as an indicator of the American economy’s health.
Given that typically, small, domestic-focused businesses are hit first and hardest in times of economic downturn.