Russell 1000 Index

Definition

The Russell 1000 Index is a stock market index that represents the stocks of the top 1,000 publicly traded U.S companies in terms of market capitalization. It is often utilized as a benchmark for large-cap portfolios. This Index is part of a broader set of Russell Indexes created by FTSE Russell, a notable index provider.

Phonetic

The phonetics of the keyword: Russell 1000 Index is: “Russell”: /ˈrʌsəl/”1000″: /ˈwʌn θaʊzənd/”Index”: /ˈɪndɛks/

Key Takeaways

1. The Russell 1000 Index is a stock market index that represents the highest-ranking 1,000 stocks in the Russell 3000 Index, which constitutes about 92% of the total market capitalization of that index. It is indicative of the performance of large-cap U.S. companies.
2. As it includes a grand majority of the largest publicly traded firms, the Russell 1000 serves as a benchmark for many institutional investors. It provides a comprehensive, unbiased, and stable barometer of the broad market and is completely reconstituted annually to ensure larger stocks do not overlap into the returns of smaller companies.
3. The Russell 1000 Index is highly diverse, covering a wide array of sectors, including technology, consumer discretionary, health care, financial services, and many more. This diversity makes the index a quintessential representation of the U.S. equity landscape.

Importance

The Russell 1000 Index is important because it is one of the most widely followed equity indices and serves as a benchmark for the U.S. stock market’s large-cap segment. This index, which is managed by FTSE Russell, represents the top 1,000 publicly-traded companies in the U.S., making up about 92% of the total market capitalization. Investors and portfolio managers often use the Russell 1000 Index as a performance benchmark and as a basis for passively managed funds. Having a comprehensive understanding of the index’s performance can therefore provide key insights into the overall health and direction of the U.S. large-cap market.

Explanation

The Russell 1000 Index serves as a benchmark for the overall performance of large-cap U.S. equities. It’s a market-capitalization-weighted index, meaning larger companies carry more weight than smaller ones. The purpose of the Russell 1000 Index is to capture the movement and performance of the majority section of the U.S. stock market – specifically the companies that sit in the highest-ranking 1,000 in the stock universe. This helps provide a comprehensive, unbiased, and stable barometer for this large-cap universe and is representative of its overall performance.Having said that, the index is widely used as a performance comparison tool for the active fund managers. By comparing their fund returns with the index, they determine whether they are achieving their goal of beating the market. Furthermore, Investors use it as a yardstick for gauging the attractiveness of investment opportunities, and to diversify their investment in the U.S. Product makers use it as a basis to create index funds, ETFs, and structured products.

Examples

1. Vanguard Russell 1000 Index Fund: This fund attempts to replicate the performance of the Russell 1000 Index by investing the majority of its assets in the stocks that comprise the index. It includes approximately 1,000 of the largest U.S. securities based on a combination of their market cap and current index membership.2. iShares Russell 1000 ETF: This is another example where a fund is managed to track the investment results of the Russell 1000 Index. It’s a popular choice for investors wanting to invest in a wide swath of large and mid-sized U.S. companies.3. Financial Performance Tracking: Companies and investors use the Russell 1000 Index as a benchmark to track the performance of specific investments or portfolios. For example, a mutual fund that primarily invests in large-cap U.S. stocks might compare its performance against the Russell 1000 Index to provide investors an idea of how well the fund is doing relative to the overall market.

Frequently Asked Questions(FAQ)

Related Finance Terms

• Equity Index
• Market Capitalization
• Index Investing
• Passive Management
• Large-cap Stocks

Sources for More Information

• Invesco
• FTSE Russell
• Investopedia
• Yahoo! Finance