What Is the Russell 1000 Index?
The term Russell 1000 Index refers to a stock market index that is used as a benchmark by investors. It is a subset of the larger Russell 3000 Index and represents the 1000 top companies by market capitalization in the United States. The Russell 1000 is owned and operated by FTSE Russell Group, which is based in the United Kingdom. The Russell 1000 is considered a bellwether index for large-cap investing.
- The Russell 1000 Index represents the top 1000 companies by market capitalization in the United States.
- The index is a subset of the Russell 3000 Index.
- The Russell 1000 index comprises about 92% of the total market cap of all listed stocks in the U.S. equity market.
- It is considered a bellwether index for large-cap investing.
- Performance and characteristics of the index are provided monthly by FTSE Russell.
Understanding the Russell 1000 Index
The Russell 1000 was launched on Jan. 1, 1984, by FTSE Russell, which also manages the Russell 3000 and Russell 2000, as well as numerous alternative indexes derived from each. As mentioned above, it is a subset of the Russell 3000 index and is market capitalization-weighted. This means that the largest companies constitute the largest percentages in the index and will affect performance more than the smallest Index members.
To determine the holdings of the Russell 1000, the company ranks all of the stocks included in the Russell 3000 by market capitalization and identifies the market cap breakpoint of the 1,000th stock ranking. This breakpoint is the primary market capitalization used to determine index eligibility. Many stocks are swapped between the Russell 1000 and Russell 2000 at the annual reconstitution however variation around the market cap breakpoint is the determining factor.
The index consists of approximately 92% of the total market capitalization of all listed stocks in the U.S. equity market. Its components are reconstituted annually in May. However, newly listed stocks with initial public offerings (IPOs) are considered for inclusion quarterly.
Performance and characteristics of the Russell 1000 Index are provided monthly by FTSE Russell. As of Feb. 28, 2021, the Russell 1000 has 1,013 holdings and the average market cap was $421.75 billion. The median market cap was $13.5 billion and the company with the largest market capitalization was Apple (AAPL) at $2.07 trillion.
You can invest in the Russell 1000 index through a mutual fund or an exchange-traded fund.
FTSE Russell also offers a number of index variations derived from the Russell 1000. These variations include the:
- Russell 1000 Value
- Russell 1000 Growth
- Russell 1000 Defensive
- Russell 1000 Dynamic
- Russell 1000 Growth-Defensive
- Russell 1000 Growth-Dynamic
- Russell 1000 Value-Defensive
- Russell 1000 Value-Dynamic
Investors can who don't want to invest directly in the index may buy shares in passively managed index exchange-traded funds (ETFs) offered by iShares, including the iShares Russell 1000 Index ETF (IWB) and the iShares Russell 1000 Value ETF (IWD).
iShares Russell 1000 Index ETF (IWB)
Many investors prefer the Russell 1000 for large-cap portfolio exposure. The iShares Russell 1000 Index ETF is one of the leading funds offering comprehensive investment in all of the Russell 1000 components. IWB is an index fund that seeks to match the holdings and return of the Russell 1000 Index.
iShares Russell 1000 Value ETF (IWD)
The iShares Russell 1000 Value ETF allows investors to track both mid- and large-cap U.S. equities based on the Russell 1000 index. According to the ETF's factsheet, its holdings are considered to be undervalued.
The ETF was launched on May 22, 2000. It has an expense ratio of 0.19%, with AUM of $47.5 billion as of March 2021.
The ETF also trades on the NYSE with an average daily trading volume of 5.3 million shares. As of March 4, 2021, IWD traded at $144.18 with a YTD return of 6.7%
Russell 1000 Index vs. Dow Jones Industrial Average vs. Standard & Poor's 500 Index
The DJIA, which is also known as the Dow 30, tracks the largest 30 blue-chip stocks listed on the NYSE and the Nasdaq. Transport and utility companies are excluded from the index. It is the second-oldest stock market index in the United States and generally serves as a broad representation of the U.S. economy. The index, which was established on May 26, 1896, had a total market cap of $9.5 billion as of Feb. 26, 2021.
The S&P 500 is one of the most commonly used indexes to measure the U.S. economy and large-cap companies in the U.S. It is made of 500 of the largest companies in the country. Established on March 4, 1957, it had a total market cap of $33.9 billion as of Feb. 26, 2021.