What Is the Russell Top 200 Index?
The Russell Top 200 Index tracks the stock market performance of the largest 200 companies in the Russell 3000 index. Investors and analysts watch it as a benchmark for U.S.-based ultra-large-cap stocks.
The Russell 3000 is a capitalization-weighted stock market index. It can serve as a barometer of the entire U.S. stock market.
- The Russell Top 200 index is a mega-cap equity index published by FTSE Russell.
- The index is composed of the 200 largest companies that are tracked in the Russell 3000 market index.
- The Top 200 competes with the S&P 500 and the Dow 30 as an ultra-large cap benchmark index.
Understanding the Russell Top 200 Index
The Russell Top 200 Index is a more concentrated version of the S&P 500, although many Russell 200 members are also listed on the larger benchmark. As of Sep. 30, 2022, the Russell Top 200 Index represents about 68% of the total market capitalization of the Russell 3000 index.
A significant portion of the underlying index is made up of companies in the financial services, consumer discretionary, healthcare, and technology sectors. The technology weighting in the index has steadily increased over the past decade as many companies look to bolster their business operations with cutting-edge technology.
The biggest holdings consist of tech giants like Apple (AAPL), Alphabet (GOOG) and Microsoft (MSFT). As of Sept. 30, 2022, the average market capitalization of stocks listed in the index stands at about $569 billion.
Advantages of the Russell Top 200 Index
Investing in ultra large-cap stocks has a number of advantages. Large companies generate consistent returns with far less volatility than companies just getting started. They control diverse business channels, which means their strongest revenue streams can compensate for others in trying times.
Many of these companies have a track record of paying dividends or repurchasing shares, offering investors a steady stream of income. For the Russell Top 200, investors can expect the same level of consistency and stability found in many of its constituents.
Mega-cap stocks often wield significant influence in their industries due to the size and sheer volume of goods and services they sell during a given time period. Apple, for instance, holds a market cap of more than $2.2 trillion as of Oct. 14, 2022.
There are 18 companies traded in the U.S that hold capitalizations above $300 billion, and most of them are operating in the technology sector. In the past, blue-chip companies such as ExxonMobil (XOM) and General Electric (GE) held most of these seats as investors trusted them to deliver consistent dividend payments and steady returns.
The FTSE Russell reconstitutes the index annually to exclude companies that no longer meet the minimum criteria or to account for growing ones that require inclusion.
The index itself is found under the symbol RT200, but often trades through various exchange-traded funds. The most popular exchange-traded fund in the Russell 200 Index is the iShares Russell Top 200 Index, released in September 2009.
Limitations of the Russell Top 200 Index
The primary disadvantage of investing in mature companies or in the indexes that track them is the limited upside growth potential compared to young upstarts.
Small companies introduce new technology and products at a much faster pace. This often translates into substantial gains in the stock market.
A large company can't innovate at the same pace as a small one as a result of lengthy approval processes through multiple layers of management. Therefore, their shares are traded for value or income qualities rather than for growth potential.