What Is the Russell 3000 Index?
Let me explain the Russell 3000 Index directly: it's a stock market index that tracks the performance of the 3,000 largest publicly traded companies in the US, covering about 96% of the investable US stock market. As part of FTSE Russell, this index gives you exposure to the broad US equity market, and it started on January 1, 1984. It measures the performance of these roughly 3,000 companies, which make up that significant portion of the market.
Key Takeaways
You should know that the Russell 3000 is under the FTSE Russell group. It tracks the largest 3,000 US companies, representing around 96% of the investable equity market. This index is the foundation for the large-cap Russell 1000 and the small-cap Russell 2000. Keep in mind that large-cap stocks drive most of its performance.
Understanding the Russell 3000 Index
I'm telling you, the Russell 3000 serves as the building block for both the Russell 1000 and Russell 2000. The top 1,000 stocks in it form the Russell 1000, while the smallest 2,000 make up the Russell 2000. This index is built to be a comprehensive, unbiased gauge of the broad market, and it's reconstituted every year to include new and growing equities. You'll find heavy representation from sectors like financials, consumer discretionary, healthcare, and technology.
As of September 2024, the average market cap of its holdings was $846.1 billion, with 2,981 holdings in total.
Russell 3000 Top 11 Holdings
- Apple (AAPL) - Technology
- Microsoft (MSFT) - Technology
- Nvidia (NVDA) - Technology
- Amazon (AMZN) - Consumer Discretionary
- Meta (META) - Technology
- Alphabet Class A (GOOGL) - Technology
- Berkshire Hathaway (BRK.B) - Financials & Industrials
- Eli Lilly (LLY) - Healthcare
- Alphabet Class C (GOOG) - Technology
- Broadcom (AVGO) - Technology/Communications
- JPMorgan Chase (JPM) - Financials
Russell 3000 Index Reconstitution
The Russell US Indexes adapt to the changing equity market, and the annual reconstitution is key to that. During this process, breakpoints for large-cap, mid-cap, and small-cap are redefined to capture the previous year's market shifts. Companies get evaluated on their value-to-growth spectrum, and they're added, removed, or moved between the Russell 3000, 2000, and 1000. This happens once a year, on the last Friday in June.
Investing in the Russell 3000 Index
FTSE Russell doesn't let you invest directly in the index. You could buy shares of individual companies in it, but many institutions offer ETFs or index funds that replicate its performance by holding its component stocks.
Russell 3000 vs. Other Indexes
Compare it to the S&P 500, which tracks the top 500 companies and covers 80% of US stocks, versus the Russell 3000's 96%. The Dow Jones Industrial Average follows 30 large companies across most sectors, excluding transportation and utilities. The Nasdaq Composite covers over 3,000 securities on the Nasdaq exchange, broader than the S&P or DJIA but tech-heavy.
Limitations of the Russell 3000 Index
Large-cap stocks dominate its performance, so returns from other segments get overshadowed. It limits your portfolio to US stocks only, without other assets. Plus, the index data updates only quarterly or annually.
Frequently Asked Questions
Can you invest directly in an index? No, you can't invest directly in something like the Russell 3000 or S&P 500, but you can use index funds or ETFs that track it.
How are stocks picked for the Russell 3000? FTSE Russell looks at total market cap, calculated by multiplying outstanding shares by market price on the rank day during annual reconstitution, to see if they're large enough.
What is an index fund? It's a mutual fund or ETF designed to match the components of a market index like the Russell 3000.
The Bottom Line
Established in 1984, the Russell 3000 measures the performance of the largest 3,000 US companies, covering 96% of the investable equity market. Large-caps like Apple, Microsoft, and Meta drive it, and that's the core of what you need to know.
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