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The Russell 2000 index (RUT) tracks the performance of 2,000 stocks included in the Russell 3000 index. It is a small-cap index, and is a commonly used benchmark by mutual funds identifying as ‘small-cap.’ The stocks included in the Russell 2000 account for around 10% of the Russell 3000’s total market capitalisation.
This page will take you through a brief history of the RUT index, explain how the stocks it tracks are selected, and give you all the necessary information to be able to invest in the performance of the index.
The Russell 2000 index was created by the Frank Russell Company in 1984, and is today run by FTSE Russell (a subsidiary company of the London Stock Exchange Group). The aim of the index was to provide a small-cap index related to the Russell 3000 – a benchmark index of the US stock market which tracks the stock performance of the 3,000 companies in the US with the highest total market capitalisation.
Over time the Russell 2000 index has grown steadily, with a large drop after the 2007-08 market crash followed by a strong recovery. The index’s all-time high of 1,740.75 was achieved on August 31st 2018. It fell sharply after this point and was showing an upward trend back towards this level before the COVID-19 pandemic induced another significant drop in the RUT index.
The stocks tracked by the Russell 2000 index are those of the smallest 2,000 companies tracked by the larger Russell 3000 index. Combined, these stocks account for only around 10% of the market capitalisation of the Russell 3000 companies, making the Russell 2000 one of the go-to small-cap indices in the current world economy.
You cannot invest directly in an index, but you can use financial products to invest in a way that tracks its progress. The two most common of these instruments are ETFs and mutual funds. ETF stands for ‘exchange-traded fund,’ they allow you to have a diversified investment that follows an index such as the RUT, and can also be traded at any time on an exchange. Mutual funds also offer you the ability to invest in the performance of the RUT, but these can only be bought or sold at the end of each trading day, so if you’re looking to trade rather than hold for the long term, it’s better to use an ETF.