Don’t tussle with the Russell. This is what you need to know about the Russell 3000 (ticker: RUA), an American stock market index.
What’s a stock market index?
If the stock market is a giant jigsaw puzzle, you can think of an index as a magnifying glass. If you were using the Russell 3000 model, you could take a look at 3,000 of the biggest pieces, giving you an excellent idea of what the entire picture looks like.
In other words, an index is a tool that helps you gauge the stock market.
But before we get too far into the weeds, let’s start with the stock market, which is where stocks, bonds, and other assets are bought and sold, like the New York Stock Exchange.
When talking about the stock market, you generally hear people using a stock market index in reference to the market’s performance.
A stock market index, then, is an index, or measurement, of a market. Specifically, an index is a tool (like a magnifying glass) used to examine, express, or describe what’s happening in a stock market.
An index is simply a curated list of certain securities. A security is an investment product, including stocks, bonds, and mutual funds.
What is the Russell 3000?
According to FTSE Russell, the index is one of the leading market benchmarks for investors. Because the index covers a very broad range of U.S. stocks, it can “allow investors to track current and historical market performance by specific size, investment style and other market characteristics”.
In other words, the Russell 3000 is encompasses so many stocks, as an index, that it can be examined and dissected in a number of ways, making it a valuable tool for investors.
It also serves as the cornerstone index for FTSE Russell, which has other indices derived from the Russell 3000. The Russell 1000 and small cap Russell 2000 indices, for example, track a subset of stocks within the Russell 3000.
These indices are, in a way, like Russian nesting dolls in that they track indexes within indexes.
More about the Russell 3000
In a nutshell, the Russell 3000 is a list of the 1,000 of biggest publicly traded companies, and 2,000 smaller companies traded on the stock market.
If the Russell 3000 were a Spotify playlist, it would simply be a list of the 3,000 most-often played songs on the entire platform, regardless of genre.
It’s also a bellwether index, meaning that it’s one of the key indices followed by investors to get an idea of the market’s performance over a given period of time.
What’s in the Russell 3000
The Russell 3000 represents 98% of the U.S. equities market, with 3,000 companies that are among the most liquid and frequently traded on stock exchanges. The mix of stocks changes from year to year, so the index is reconstituted annually every June.
The largest companies in the index include Apple, Amazon, Exxonmobil, and JPMorgan Chase.
Because the index is so broad, it includes companies from any and all industries, but they’re mostly concentrated in the financial and tech sectors.
Other Important Indices
While not as popular or referenced in the mainstream media as the Dow Jones Industrial Average or the S&P 500, the Russell 3000 is still considered one of the more important market indices. Given its broad approach, the index can give you a good idea of how the market performed on a given day.
Other main indices include the S&P 500, the Dow Jones Industrial Average, and Nasdaq.
You can invest in many of the companies that are tracked on the Russell 3000 here.