Russell 2000 Index

Written by True Tamplin, BSc, CEPF® | Reviewed by Editorial Team

Updated on December 28, 2022

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.

 

Russell 2000 Index FAQs

What is the Russell 2000 Index?

The Russell 2000 is a market-cap weighted index that bases its weighting on shares outstanding.

What companies make up the Russell 2000 Index?

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.

What is the purpose of the Russell 2000 Index?

The Russell 2000 Index is intended to reflect the status of America’s small-cap companies.

What type of investors invest in the Russell 2000 Index?

Some experts say the Russell 2000 is to small-cap investors what the S&P 500 is for large-cap investors.

Why is the Russell 2000 an indicator of American economic health?

Typically, small, domestic-focused businesses are hit first and hardest in times of economic downturn. These types of businesses are exactly what the Russell 2000 tracks.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

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