Russell 3000 vs s&p 500 index
Since the passive investment strategy is spreading among individual investors like wildfire. This article covers on the major stock indexes & their performance, top holding companies, industry composition, etc.
I hope this article provides you with helpful insights.
As you read keep in mind that you can’t directly invest in these indexes. But you can invest in funds/ETFs which track the performance of these indexes.
Russell 3000 and S&P 500 are two of the most prominent indexes in the US stock market.
The primary difference between the two indices is that the S&P 500 is a large-cap index, while the Russell 3000 is a total market index that includes 1000 large-cap companies, 2000 mid-cap, and small-cap stocks.
What is Russell 3000?
As the name goes, the Russell 3000 index tracks the 3000 publicly tradeable U.S. companies. Also, the companies are weighted by their market capitalization.
It tracks 96% of the total stock market.
Russell 3000 index is a combination of Russell 1000 and Russell 2000 indexes.
- Russell 1000: A list of the top 1,000 U.S. stocks by market cap.
- Russell 2000 Index: A list made of the next 2,000 U.S. stocks by market cap.
Unlike Dow Jones Industrial Average which tracks only the 30 companies or Nasdaq composite which cover mostly tech companies, Russell 3000 tracks most of the U.S total stock market weighted by market cap.
The Index was launched on 1 January 1984 & it is maintained by FTSE Russell , a subsidiary of London stock exchange.
What is S&P 500?
The S&P 500 which is an acronym for Standard and Poor’s Composition was introduced stock market index to track the value of 500 corporations that are listed in the US stock market.
This index was launched on March 4th, 1957 and it consists of 500 leading companies and covers approximately 80% of the available market capitalization.
The S&P 500 was the first U.S. Market Cap-weighted stock market index. The returns of the S&P 500 are not fixed and it varies a lot from year to year. But in the long run, the average returns of the S&P 500 index generate returns above the inflation.
As of today, the total market cap of the S&P 500 index is $36.12 Trillion.
Performance: Russell 3000 vs s&p 500 historical returns
From the below image, you can see the S&P 500 outperformed the Russell 3000 index by 1.16% annually. The total return of S&P 500 stands at 11,868% and the total return of Russell 3000 stands at 6183%.
However for the past 25 years , both indices shows similarity in return, with difference of 0.4% annually.
Read more: 95 years of S&P 500 index return
Portfolio composition
In the below image , you can see the top 10 holdings of both indices.
Geography:
Both the indices are focused on investing in U.S Stock.
Sector composition:
The sector composition of both indices are almost similar, no wonder they have similar performances for 25 years.
Market Cap:
As mentioned earlier, the S&P 500 is more of a large cap focused and Russell 3000 is blend of Large, Mid & small cap stocks.
Below image is the proof:
Portfolio reconstitution
Russell 3000 reconstitution happens once in a year at the month of June.
But the S&P 500 goes through rebalancing every quarter, unlike Russell 3000.
While FTSE Russell checks for newly listed U.S. stocks every quarter, the company may not necessarily rebalance the Russell 3000 every quarter.
Companies list
Click here for : Russell 3000 companies list 2023
Conclusion
- Russell 3000 tracks 3000 U.S companies which includes Large, Mid & small cap
- S&P 500 index tracks 500 large U.S companies.
- Both Index designed by Market capitalization
In the end, russell 3000 vs s&p 500 , which index made more to its investors?
Its s&P 500 gave an 11.64% annual return over 9.7% annual return of Russell 3000. We never know which index outperforms in the future too.
Time says the answer! Thank you for reading.
