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The S&P 500 and Russell 2000 Indexes Differ, Here is How

#SP500 #Russell2000

$RUT $RUTX

The Summary

  • The Russell 2000 index is a stock market index comprised of 2,000 small-capitalization companies.
  • The S&P 500 index is an equity index comprised of 500 large-capitalization companies.
  • Both indexes are market-cap weighted, with the S&P 500 used as a large-cap benchmark and the Russell 2000 as a small-cap proxy.

Russell 2000

The Russell 2000 index, created in Y 1984 by the Frank Russell Company, is a stock market index comprised of 2,000 small-capitalization companies. It’s made up of the bottom 67% of the Russell 3000 index, a larger index of 3,000 publicly traded companies that represent nearly 98% of the investable US stock market.

While the S&P 500 is a suitable benchmark for large-cap portfolios, the Russell 2000 is the most common benchmark for small-caps.

Investors typically monitor this index to gauge the performance of smaller, domestically-focused businesses. The smallest 1,000 companies in the Russell 2000 make up the Russell 1000 Microcap Index.

The Russell 2000 index is constructed to be representative of the smallest 2,000 listed companies in the U.S.

The S&P 500 Index

The Standard & Poor’s 500 is an equity index comprised of 500 large-capitalization companies listed on US exchanges. A large-capitalization, or large-cap, company typically has a market value greater than $6.1-B. The S&P 500 is 1 of the most widely used benchmarks. Due to its composition of 500 companies, the S&P 500 is a much broader, and perhaps accurate, measure than the popular DJIA (Dow Jones Industrial Average), which contains only 30 stocks.

The S&P 500 was introduced in Y 1923 and took on its present form on 4 March 1957. A committee from S&P Dow Jones Indices a joint venture consisting of S&P Global Inc. (SPGI), the CME Group (CME), and News Corporation (NWSA) select the index’s constituent companies. The aim is to pick companies in industries and market segments that mirror the overall US economy.

Have a healthy weekend, Keep the Faith!

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Paul Ebeling
Paul A. Ebeling, a polymath, excels, in diverse fields of knowledge Including Pattern Recognition Analysis in Equities, Commodities and Foreign Exchange, and he is the author of "The Red Roadmaster's Technical Report on the US Major Market Indices, a highly regarded, weekly financial market commentary. He is a philosopher, issuing insights on a wide range of subjects to over a million cohorts. An international audience of opinion makers, business leaders, and global organizations recognize Ebeling as an expert.   

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