Investing Assets & Markets Stocks What Is the Russell 2000? Definition & Examples of the Russell 2000 By Tim Lemke Tim Lemke Twitter Tim Lemke has more than 20 years of experience as a writer. He specializes in writing about investing, cryptocurrency, stocks, banking, business, and more. He has also been published in The Washington Times, Washington Business Journal, Wise Bread, and Patch. In 2019, he joined investment management company T. Rowe Price as a senior writer. learn about our editorial policies Updated on March 3, 2022 Reviewed by Thomas J. Brock Reviewed by Thomas J. Brock Thomas J. Brock is a CFA and CPA with more than 20 years of experience in various areas including investing, insurance portfolio management, finance and accounting, personal investment and financial planning advice, and development of educational materials about life insurance and annuities. learn about our financial review board Fact checked by Ariana Chávez Fact checked by Ariana Chávez Ariana Chávez has over a decade of professional experience in research, editing, and writing. She has spent time working in academia and digital publishing, specifically with content related to U.S. socioeconomic history and personal finance among other topics. She leverages this background as a fact checker for The Balance to ensure that facts cited in articles are accurate and appropriately sourced. learn about our editorial policies In This Article View All In This Article What Is the Russell 2000? How the Russell 2000 Performs Russell 2000 vs. S&P 500 Investing in the Russell 2000 Limitations of the Russell 2000 Frequently Asked Questions (FAQs) What does the Russell 2000 represent? How many stocks are in the Russell 2000 Index? Photo: kate_sept2004 / Getty Images Definition The Russell 2000 is a stock index that tracks 2,000 publicly traded small-capitalization companies. It is one of the most widely followed market indexes in the U.S. What Is the Russell 2000? You may be familiar with the S&P 500, an index of 500 of the largest publicly traded companies in the U.S. But another widely cited benchmark that’s less of a household name is the Russell 2000 Index. This index tracks select U.S. companies with a smaller market capitalization. The Russell 2000 is one of several U.S. indexes started in 1984 by the Frank Russell Company. The Russell 2000 is a subset of the Russell 3000, which aims to be a benchmark for the U.S. stock market as a whole and represents about 98% of the country’s investable equity market. The Russell 3000 includes the 3,000 largest publicly held companies by market capitalization, and the Russell 2000 tracks the smallest 2,000 among them. The average weighted market cap of the Russell 2000 company was $3.13 billion as of January 2022. Here’s how the major sectors of the Russell 2000 broke down at the end of 2021. Knowing how these sectors are weighted can help you craft your investment strategy. For instance, say you have money in a fund that tracks the Russell 2000 and want to buy more stocks. You may not want to buy shares of a publicly traded bank because the Russell 2000 is 15.8% financial stocks. Instead, you may decide to purchase shares in another sector the fund doesn't have a large percentage of holdings in. Note Some companies in the Russell 2000 you might know are Dillard's, Bed Bath & Beyond, 1-800-Flowers, and Cracker Barrel Old Country Store. How the Russell 2000 Performs Here’s a look at the total annual returns of the Russell 2000 compared to the Russell 1000 (the large-cap portion of the Russell 3000) and the S&P 500 since 2000. The Russell 2000 tends to be more volatile because small-cap stocks can change in value quickly. Volatility measures can differ, but the iShares Russell 2000 ETF beta has stayed close to 1.24 for several years (a beta of 1.0 is the market's average risk level). Russell 2000 vs. S&P 500 As you can see, the small-cap Russell 2000 tracks fairly closely with the large-cap S&P 500, though there are times where it moves more dramatically in one direction or another. This is because small-cap stocks are more volatile in general, so they respond more dramatically to shifts in the market. Each index will be more reliable during certain economic phases, so many investors will purchase shares of a Russell 2000 fund or ETF alongside an index fund for the S&P 500 to create a balanced portfolio. Investing in the Russell 2000 Investors who want exposure to the breadth of the Russell 2000 can invest in a mutual fund or ETF designed to track the index. Two popular offerings include the iShares Russell 2000 ETF [NYSE: IWM] and the Vanguard Russell 2000 ETF [NYSE: VTWO]. Limitations of the Russell 2000 Some investors who want access to small-cap stocks often track the Russell 2000. Keep in mind that hundreds of companies are too small to be included in the index. The “micro-cap” category, excluded from the Russell 2000, represents the smallest companies available on the market. However, they are some of the fastest-growing stocks around. Investors who are too reliant on the Russell 2000 may lack diversification across industries and sectors. For instance, the index tends to heavily favor financials, health care, technology, and industrials but has limited exposure to companies in the communications and materials sectors. Key Takeaways The Russell 2000 index includes 2,000 small-cap companies and is one of the most popular indexes for U.S. markets.The Russell 2000 tracks fairly closely with the S&P 500 but is subject to larger swings.Investors in the Russell 2000 can balance their portfolio by investing in large-cap indexes such as the S&P 500 and adding in some micro-cap exposure. Frequently Asked Questions (FAQs) What does the Russell 2000 represent? Some consider the Russell 2000 Index to indicate how well the domestic economy is doing. Its decline serves as an early-warning signal that the economic tide is turning. How many stocks are in the Russell 2000 Index? This index is a subset of the Russell 3000 and contains the stocks of 2,000 small-cap companies. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. FTSE Russell. "Russell US Indexes – 40 Years of Insights," Page 4. FTSE Russell. "Index Factsheet: Russell 2000 Index," Page 1. FTSE Russell. "Russell 2000 Index Quarterly Chartbook, Q4-2021: Sectors." FTSE Russell. "Membership List; Russell 2000 Index." BlackRock. "iShares Russell 2000 ETF."