S&P 600: Standard & Poor's Small Business Benchmark Index

What Is the S&P 600?

The S&P 600 is an index of small-cap stocks managed by Standard & Poor's. It tracks a broad range of small-sized companies that meet specific liquidity and stability requirements. This is determined by specific metrics such as public float, market capitalization, and financial viability, among other factors.

Key Takeaways

  • The S&P 600 is a benchmark index for small-cap stocks published by Standard & Poor's.
  • To be listed on the S&P 600, stocks must have a market cap of $850 million to $3.6 billion, preventing overlap with S&P's larger cap indices.
  • Several index ETFs and mutual funds allow investors to track the performance of the S&P 600 small-cap index.
  • The main reason to invest in small caps is that they have more room to grow than large caps.
  • Small-cap stocks are not as closely followed by professional analysts, allowing investors to “get in” on these companies while they’re flying under Wall Street’s radar.

Understanding the S&P 600

The S&P 600 is comparable to the Russell 2000 Index in that both measure the performance of small-cap stocks, but the former covers a much narrower range of assets. For this reason, the S&P 600 only watches about 3%–4% of total investable equities in the United States. The index lists 601 stocks with a mean market capitalization of $1.5 billion.

Market capitalization for inclusion in the S&P 600 small-cap index must fall between $850 million and $3.7 billion to ensure individual assets do not overlap with the larger S&P 500 or mid-cap S&P 400 indexes. 

A breakdown by sector shows a large portion of the listed companies operate in financials, industrials, information technology, health care, and consumer discretionary. The fewest number of companies do business in utilities and communication services. 

Investing in the S&P 600

It's not possible to directly buy and sell an index, but several exchange-traded funds (ETF) exist for investors looking to trade the S&P 600. The most active ones flow through Blackrock's iShares, State Street's SPDR ETFs, and Vanguard.

One reason investors choose these funds is to capture the massive upside potential offered by small-cap stocks. The truth is that many of the more successful companies are removed from the benchmark when they grow enough to exceed its limits and meet the criteria for one of the larger indexes. Other reasons to leave the index include a merger or delisting from the stock exchange.

The following ETFs attempt to track the performance of the S&P 600 (data as of July 2, 2022):

  • The iShares Core S&P Small-Cap ETF (IJR): Launched on May 22, 2000, IJR seeks to passively replicate the investment results of the S&P 600. The ETF boasts more than $61 billion in assets, a 30-day average volume of roughly $4.4 million, and an expense ratio of 0.06%. The ETF's largest holdings by market value include BlackRock Cash Fund, Southwestern Energy, Agree Realty, Omnicell, and Rodgers.
  • The SPDR Portfolio S&P 600 Small-Cap ETF (SPSM): Launched in 2013, SPSM offers another passive way to invest in the S&P 600. The ETF holds more than $3.9 billion in assets and has an expense ratio of 0.05%. Like the IJR, SPSM's largest holdings include the likes of Southwestern Energy, Agree Realty, and Omnicell.
  • The Invesco S&P SmallCap Value With Momentum ETF (XSVM): Launched in 2005, XSVM offers investors a more "active" approach to investing in the S&P 600. Specifically, the index is composed of 122 securities listed on the S&P 600 with the highest "value scores" and "momentum scores." The ETF has a market value of more than $598 million and an expense ratio of 0.39%. Its top holdings are Fresh Del Monte Produce, Conn's, Olympic Steel, Cross Country Healthcare, and Group 1 Automotive.
  • The Invesco S&P SmallCap Momentum ETF (XSMO): Also launched in 2005, XSMO is composed of 117 securities listed on the S&P 600 with the highest momentum scores. The ETF has around $138 million in assets with an expense ratio of 0.39%. Its biggest holdings include SM Energy, ServisFirst Bancshares, ExlService Holdings, Civitas Resources, and Coca-Cola.

Benefits of Investing in the S&P 600

More Room to Grow 

The main reason to invest in small-caps is obvious: they have more room to grow than large-caps. Giants like Microsoft, Apple, and Wal-Mart generate more than $100 billion in revenue. Naturally, growing sales quickly and significantly is much more difficult for these blue-chip companies.

On the other hand, it’s very common to find small-cap companies that are doubling or even tripling sales every year. Why? Because they’re working from a much smaller base of sales.

In other words, it’s much easier for a software small-cap to deliver “multi-bagger” returns over the next 10 years than Microsoft.

Underfollowed by Wall Street

Another big reason small-caps outperform is that professional analysts do not as closely follow them. This allows investors to “get in” on these companies while they’re flying under Wall Street’s radar.

Big mutual funds usually have to invest with "limit" rules that prevent them from owning, say, 10% of a company or using 5% of their fund on the stocks of one company. So for mutual funds with billions in assets, small-cap stocks simply don’t move the needle.


One more big benefit to small-cap stocks is diversification.

Small-cap stocks have different characteristics than mid-cap and large-cap stocks. They behave differently. Thus, small-cap stocks can add significant diversification benefits.

Limitations of the S&P 600

Investing in small-sized companies may offer higher potential returns than large-cap stocks, but it also presents several challenges.

Many of the companies listed on the S&P 600 maintain small geographic footprints and tend to suffer when the dollar weakens.

Theoretically, this incentivizes investors to trade overseas rather than buying from a small, domestically owned business. A hit to earnings growth would likely also take a toll on the stock price.

Small-caps have tons of room to grow because they’re working with a smaller base of sales. That’s because these companies are often young startups. And with young startups come unproven business models, less-experienced management teams, and limited financial resources.

Because of those factors, the future is far more difficult to predict for small-cap companies than blue-chip companies (which make billions year-in and year-out).

More Risks Associated With Small-Cap Investing

Volatility Risk

Volatility risk refers to the degree to which the price of an asset swings up and down. The higher the volatility, the riskier the investment. 

Because the long-term future of small firms is hard to predict, small-cap stocks tend to swing more wildly than large-cap stocks. Small-cap stocks are consistently more volatile than the overall market. So, if you want exposure to small caps, make sure you have a long enough time horizon to navigate through the turbulence.

Business Risk and Default Risk

Business risk is the exposure of a company to factors that will lead to lower revenue and earnings. Default risk refers to the chance that a company won’t be able to pay its debt obligations.

On this front, small-cap companies carry both a higher risk of business and default risk. Why?

While massive blue-chip businesses like Apple and Disney have the financial muscle and brand power to live on for decades, small startups typically have unproven business models, inexperienced management teams, and limited financial resources. This makes small firms far more susceptible to factors such as a downturn in the economy, a spike in costs, and intense competition from much larger companies.

For every David and Goliath success story, there are far more situations where the little guy gets crushed. As a small-cap investor, you have to accept that fact and be able to play the numbers game.

Liquidity Risk

Liquidity risk refers to the extent to which an asset can be bought or sold quickly without significantly impacting its price.

Since small firms don’t attract as much interest as large companies, small-cap stocks are less liquid than large caps. While it’s easy to buy and sell a boatload of Microsoft shares at any time without affecting its price, it’s not that simple for small caps.

Often, small-cap stocks don’t have enough supply when you want to buy them or enough demand when you want to sell them. This results in investors buying small-caps at higher prices and selling them at lower prices than expected.

Lack of Coverage

Small-cap stocks offer tremendous hidden opportunities to make money due largely to their lack of coverage from Wall Street analysts and institutional investors.

But on the flip side, this lack of coverage makes it difficult to obtain quality research and information on small-cap companies. The consequences are twofold:

  1. It’s tougher to notice managerial incompetence and unethical behavior at small-cap firms than at widely followed large-cap firms.
  2. Investors need to devote far more time and effort to analyzing small-cap stocks than large-cap stocks to make informed decisions.

If you want to dive into the small-cap space, you have to be able to embrace the uncertainty that comes with a lack of information.

Composition of the S&P 600

The top 10 constituents in the S&P 600 by index weight are (on July 2, 2022):

  1. Southwestern Energy
  2. Agree Realty
  3. Omnicell
  4. Rogers
  5. AMN Healthcare
  6. ExlService Holdings
  7. Vonage
  8. Exponent
  9. Helmerich & Payne
  10. Lantheus

The top 10 holdings of the S&P 600 dictate about 5.9% of the weight of the index.

And here is the index's sector breakdown (on July 2, 2022, by weight):

  • Financials: 18.2%
  • Industrials: 16.3%
  • Information Technology: 13.5%
  • Healthcare: 12.5%
  • Consumer Discretionary: 11.5%
  • Real Estate: 7.6%
  • Consumer Staples: 5.6%
  • Materials: 5.4%
  • Energy: 5.2%
  • Utilities: 2.3%
  • Communication Services: 2.1%

What Is the Ticker Symbol for the S&P 600?

The S&P 600 itself does not have a ticker symbol. However, ETFs that seek to track the performance of the S&P 600 include the iShares Core S&P Small-Cap ETF (ticker symbol IJR) and the SPDR Portfolio S&P 600 Small-Cap ETF (ticker symbol SPSM).

What S&P Indexes Track Large-Cap and Mid-Cap Companies?

The S&P 500 tracks the 500 largest publicly-traded companies in the U.S. Meanwhile, the S&P 400 is the most widely used measure of publicly traded mid-cap stocks in the U.S.

What Is the Difference Between the S&P 500 and the S&P 600?

The S&P 500 index is a gauge of the 500 largest stocks in the U.S. The S&P 600, on the other hand, covers the small-cap range of U.S. stocks.

Article Sources
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  1. S&P Dow Jones Indices. "S&P SmallCap 600." Download Factsheet.

  2. iShares. "iShares Core S&P Small-Cap ETF."

  3. State Street. "SPDR Portfolio S&P 600 Small Cap ETF."

  4. Invesco. "Invesco S&P SmallCap Value with Momentum ETF."

  5. Invesco. "Invesco S&P SmallCap Momentum ETF."

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