What Is the Russell Top 50 Index?
The Russell Top 50 Index is a market-capitalization-weighted index of the 50 largest stocks in the broad-based Russell 3000 universe of U.S.-based equities. The Top 50 index therefore is a mega-cap index, and may be compared with the Dow Jones Industrial Average (DJIA), which contains 30 blue chip stocks.
- The Russell Top 50 Index is a market capitalization weighted index of the 50 largest stocks in the Russell 3000 universe of U.S.-based equities.
- The Top 50 index can be considered a representation of mega cap stocks.
- Despite have only 50 components, the current Top 50 index membership represents approximately 40% of the total market capitalization of the Russell 3000.
Understanding the Russell Top 50 Index
The Russell Top 50 Index holds just 50 stocks, but because modern mega cap companies are so large, it still represents a large proportion of all U.S. equities. For example, in 2007, the market cap of the stocks in the Russell Top 50 Index accounted for more than 40 percent of the total market capitalization of all United States-based equities. Russell U.S. Indexes are the leading U.S. equity benchmarks for institutional investors. This broad range of U.S. indexes allow investors to track current and historical market performance by specific size, investment style and other market characteristics.
All Russell U.S. Indexes are subsets of the Russell 3000 Index, which includes the well-known large-cap Russell 1000 Index and small cap Russell 2000 Index. The Russell U.S. Indexes are designed as the building blocks of a broad range of financial products, such as index tracking funds, derivatives and Exchange Traded Funds (ETFs), as well as fulfilling their role as performance benchmarks. The index can be considered a representation of mega-cap stocks, as the average member's market cap is more than $175 billion. The index is reconstituted annually to account for new and growing member companies.
The Russell Top 50 Index typically pays an above-average dividend yield compared to the S&P 500, a reflection of the general safety and cash flow generation found among the largest traded companies.
Mega-Cap ETFs on the Russell Top 50 Index
Nasdaq’s website ran a Zacks.com-reported story in June 2018 headlined “4 Solid Reasons to Buy Mega-Cap ETFs Now.” Mega-cap generally describes companies with a market capitalization above $300 billion. An ETF, or exchange-traded fund, typically invests in a security tracking an index, an index fund, bonds, or a commodity.
The article analyzed data based in part on the Russell 2000 Index, saying that though small-cap stocks led in the first half of the year from February to May, June is set to bring a rise in mega-caps.
The article lists its top four recommendations for investors when looking to mega-cap ETFs:
- the SPDR Dow Jones Industrial Average ETF (DIA), which Zacks says is the both the biggest and most popular ETF across the mega-cap landscape;
- the Vanguard Mega Cap Growth ETF (MGK), which looks at the growth segment and so tracks the CRSP US Mega Cap Growth Index;
- the Vanguard Mega Cap Value ETF (MGV), which tracks the CRSP US Mega Cap Value Index and offers investors a source for value stocks; and
- the Invesco S&P 500 Top 50 ETF (XLG), a fund that tracks the S&P 500 Top 50 ETF Index, measuring "the cap-weighted performance of 50 of the largest companies on the S&P 500 index, reflecting the performance of U.S. mega-cap stocks.” XLG tends to track the Russell Top 50 best.