Quick tip: While they may have better upside potential, Russell 2000 stocks also can be more volatile and risky, with their performance during the COVID-19 pandemic in particular showing how they can be hit harder than large-cap stocks.Īnother thing to keep in mind is that the Russell 2000 is composed according to different rules than other indexes, including some such as the S&P 600 that track small-cap stocks as well.

'That is, they both rise and fall by a greater magnitude through the ups-and-downs of an economic cycle.'

'Small-capitalization stocks tend to be more economically-sensitive and cyclical than large-capitalization stocks,' says Ari Wald, a technical analyst at Oppenheimer. Given that it covers a larger number and broader range of companies than the Dow Jones Industrial Average or the S&P 500, the Russell 2000 exhibits slightly different behavior from these and other major market gauges. Conversely, some of the smallest members include biotechnology pharmaceutical companies such as Forte Biosciences and Hookipa Pharma, which had market values of less than $1 billion.

Some of the largest firms in the index include AMC, Asana, Crocs, and Macys, with market values in the $10 billion-$20 billion range as of November 2021. Note: According to FTSE Russell, the average market cap of companies in the Russell 2000 was $2.799 billion, as of July 31, 2022. 'Depending on which stage an economy is in, its expansion cycle might determine whether an investor wants to buy large-cap or small cap-stocks. 'The Russell US indexes were created over 40 years ago and have been a key barometer of the US economy,' says Edward Moya, a senior market analyst at New York-based foreign-exchange broker OANDA. FTSE Russell then picks the 2,000 smallest stocks from this index, removing such multibillion-dollar corporations as Microsoft, Apple, and Alphabet, leaving the companies that make up what could be considered the 'core' of the US economy. To be included in the index, companies must first be part of the Russell 3000, which comprises the 3,000 largest US-traded equities. This means that stocks with greater market value have a proportionally larger impact on the index's overall level. As with the Russell 3000 and many other equity indexes, the Russell 2000 is weighted by market-capitalization.

Russell 2000 index