The Russell 3000 Index is a benchmark for the stock prices of 3,000 US companies, covering 98% of the total. The Russell 3000E Index includes 4,000 companies, with the E standing for Extended. The largest 3,000 stocks in the Russell 3000E are selected for the Russell 3000 Index based on market capitalization. It is used as a benchmark by analysts and for mutual funds. The list of stocks is calculated annually and used to monitor market performance and evaluate fund managers.
The Russell 3000 Index is an index of the stock prices of 3,000 publicly traded US companies. This covers about 98% of the total in the US. The combination of the index’s scale and credibility means that it is used as a benchmark by both analysts and companies offering financial products such as mutual funds.
The naming system used by Russell Investments has the potential to be confusing. The Russell 3000 Index is a subset of the Russell 3000E Index, which is the largest index managed by the company. The latter actually includes 4,000 companies; the E stands for Extended and the index consists of the 3,000 stocks in the Russell 3000 plus 1,000 smaller stocks.
The Russell 3000E Index covers all stocks traded in the US with a few exceptions. These include those that trade for less than $1 United States Dollars (USD), some that trade over-the-counter, meaning they are not traded on an exchange, and foreign stocks. Of all the stocks included in the Russell 3000E, the largest 3,000 are selected for the Russell 3000 Index. This is based on market capitalization, which is the share price times the number of tradable shares. Indeed, it is the value that the market places on the company as a whole.
The list of stocks included in the various Russell Indices is calculated once a year. It is based on the annual market capitalization as of 31 May, with the new pricing announced in mid-June and effective from the last Friday in June. If a company merges or its shares are delisted, they are not automatically delisted from the Russell 3000. Those shares will usually be prime candidates for delisting when newly listed companies are added, which happens once a quarter.
There are two main ways the Russell 3000 Index is used. The first is as a benchmark. It can be used simply to monitor the performance of stock markets as a whole or to monitor the relative performance of particular industries. It can also be used as a benchmark to evaluate the performance of a fund manager; someone who fails to outperform the index figure is unlikely to get much business!
The other major use of the Russell 3000 index is for mutual funds and exchange-traded funds. These are designed to buy and sell shares in proportions that match the constitution of the index. In turn, this should mean that the funds match the performance of the market as a whole.
Smart Asset.
Protect your devices with Threat Protection by NordVPN
