Russell 3000 index

Definition

The Russell 3000 index is a stock market index that serves as a benchmark for the overall performance of the U.S. equity market. 

What is the Russell 3000 index?

The Russell 3000 index includes the largest 3,000 U.S. companies by market capitalization. These companies span various sectors and industries, providing investors with diversified exposure to the U.S. equity market.

Like many other major stock market indexes, the Russell 3000 index is weighted by market capitalization. This means that larger companies with higher market capitalizations have a greater impact on the index’s performance compared to smaller companies.

The index provides comprehensive coverage of the U.S. equity market, including companies of different sizes, growth profiles, and business models, offering investors a broad representation of the entire U.S. stock market.

To be included in the Russell 3000 index, companies must meet certain liquidity and trading volume requirements. This ensures that the index components are sufficiently liquid and tradable for investors. 

Example of the Russell 3000 index

Suppose an investor wants to evaluate the performance of their investment portfolio relative to the broader U.S. stock market. They may compare their portfolio’s returns to the returns of the Russell 3000 index over a specific period, such as one year. If the investor’s portfolio outperforms the Russell 3000 index, it indicates that their investments have performed well relative to the overall U.S. equity market. Conversely, if the portfolio underperforms the index, it suggests that adjustments may be needed to improve performance.