The key question for small cap stocks is, relative to large caps, will they more successfully adapt to rapid changes in economic conditions in 2020s? Explore historical market data straight from the source to help refine your trading strategies. This helps to reflect a firm's investable valuation accurately. Knowing that index managers mechanistically buy new joiners and mindlessly sell old exiters, the arbitrageurs buy the stocks likely to enter and sell the stocks likely to leave. This similarity appears to be borne out in the U.S. large-cap equity universe when comparing the returns of the Russell 1000® and the S&P 500®. The Russell 2000 index, created in 1984 by the Frank Russell Company, is a stock market index comprised of 2000 small-capitalization companies. VOO is the new kid on the block with a fund inception date of Sept. 9, 2010, so, it has fewer years of data for consideration. To illustrate Swensen’s point, I’ve posted a copy of a report on MarketRiders from an investment bank detailing the 2008 “Russell Trade” to illustrate how professional money managers are about to game the system. More specifically, the S&P 500 is also float-weighted, which calculates a company's market capitalization using only the number of shares available for trading by the public. The SPY returned the lowest of the three funds. The S&P 600 SmallCap Index Beats the Russell 2000 by 52% over 7 Years*. The index has returned -1.01% MTD, bringing its YTD return to 2.03% as of March 13, 2015. 1994-1999: during the strongest phase of the 1990s expansion, the S&P 500® large caps again outperformed the Russell 2000 small caps just as they had during the 1980s boom. The concept is fairly simple: select stocks that have been historically less risky in an attempt to capture some market upside, while limiting the potential downside. It is also important to note that the S&P SmallCap 600 has exhibited lower volatility than the Russell 2000 historically, leading to a higher Sharpe Ratio. As the saying goes, we must compare “apples to apples” in order to understand which is better. Both the S&P 500 and Russell 2000 indexes are market-capitalization-weighted. So how are such benchmarks or indices crafted to be able to provide ideal measuring tools within the segment they represent? Here, we’ll focus on ETFs that track two of the more popular indexes, the S&P 500 and the Russell 2000. Past performance is no guarantee of future results. Key distinctions between them are driven by the size of the companies in the index they track—large-cap for the S&P 500 and small-cap for the Russell 2000—the volatility of the underlying index, the method of constituent selection, and the fees they charge. When the July reconstitution occurs, the arbitrage activity causes the index fund manager to pay more for purchases and receive less for sales. This report and the information herein should not be considered investment advice or the results of actual market experience. Year-to-date the Russell 2000 and Russell Microcap Indexes are down 24.4% and 24.6%, respectively, each off by at least 1200 basis points versus the S&P 500, and squarely in bear market territory. Erik Norland. The Russell Top 50 Index is a mega-cap stock index of the 50 largest stocks in the Russell 3000 universe of U.S.-based equities. The Standard & Poor's 500 (S&P 500) is a market-capitalization-weighted index of some of the largest publicly-traded U.S. corporations. The Russell 2000 index measures the performance of approximately 2,000 small caps in the Russell 3000 Index, which comprises the 3,000 largest U.S. stocks. Although the Russell 2000 and S&P 500® usually exhibit a high correlation, they can have periods of significant outperformance/underperformance relative to one another. © 2020 CME Group Inc. All rights reserved. The majority of this move is credited to the European Central Bank’s (ECB) purchasing of debt to support its economy. Worse yet, the rules-based process for the annual reconstitution, creates another cost for investors. As of Oct. 2019, the top 10 holdings in the Russell 2000 by market capitalization include: NovoCure Limited (NVCR), Haemonetics Corporation (HAE), Trex Company Inc. (TREX), Generac Holdings Inc. (GNRC), Rexford Industrial Realty Inc. (REXR), Portland General Electric Company (POR), First Industrial Realty Trust Inc. (FR), Science Applications International Corporation (SAIC), Southwest Gas Holdings Inc. (SWX) and ONE Gas Inc. (OGS). Two of the more popular choices are the S&P 500 ETFs and Russell 2000 ETFs. One would have to review an index that would be a representation of all infrastructure companies, like the S&P BSE India Infrastructure Index. All rights reserved. This time, will they be able to overcome or adapt to the competitive advantages of the largest online delivery, software, social networking and technology equipment makers? Stream live futures and options market data directly from CME Group. This is a series of blog posts relating to the in depth analysis of performance differential between the S&P SmallCap 600 and the Russell 2000. The posts on this blog are opinions, not advice. Charts and tables are provided for illustrative purposes only. This time the S&P 500® outperformed the Russell 2000 by 93% over five years. Follow Mitch Tuchman and get email alerts. The Russell 2000 index measures the performance of approximately 2,000 small caps in the Russell 3000 Index, which comprises the 3,000 largest U.S. stocks. However, in the small-cap universe, the returns of the Russell 2000 and the S&P SmallCap 600 are considerably different. Index constituents are selected by a committee, which takes into account criteria such as market capitalization, liquidity, financial viability, length of trading, and other factors. As of Oct. 2019, the top 10 holdings in the S&P 500 by market capitalization include: Microsoft (MSFT), Apple Inc. (AAPL), Amazon.com Inc. (AMZN), Alphabet Inc. (GOOG), Facebook Inc. (FB), Berkshire Hathaway (BRK.B), Visa Inc. (V), JPMorgan Chase (JPM), Johnson & Johnson (JNJ), and Walmart Inc. (WMT). S&P 500 vs. Russell 2000 ETFs: An Overview, S&P 500/Citigroup Pure Value Index Definition. Both indices, IJR (S&P 600 SmallCap Index) and IWM (Russell 2000 Index) purport to give an investor exposure to small cap stocks in the US stock market. Past performance is no guarantee of future results. While it seems counterintuitive, lower volatility strategies have actually outperformed the market over the long term.