December 30

S&P600 vs Russell2000 | Which one is better? – A Comparison of Small-Cap Indexes

Last Updated on 30 December, 2022 by Samuelsson

S&P 600 vs Russell 2000: A Comparison of Small-Cap Indexes

Small-cap stocks, or those with market capitalizations of less than $2 billion, are known for their high growth potential and are often favored by investors looking to capitalize on emerging trends and industries. Two popular indexes that track the performance of small-cap stocks in the United States are the S&P 600 SmallCap Index and the Russell 2000 Index.

While both indexes are focused on small-cap stocks, there are some notable differences between the two. Here’s a closer look at the S&P 600 SmallCap Index and the Russell 2000 Index and how they compare:

Index Composition

The S&P 600 SmallCap Index is made up of 600 small-cap stocks and is weighted by market capitalization. This means that the index is composed of the 600 smallest stocks listed on the S&P Index and the weight of each stock is determined by its market value.

On the other hand, the Russell 2000 Index is comprised of 2000 small-cap stocks and is weighted by a combination of market capitalization and fundamental factors. This means that the index is composed of the 2000 smallest stocks listed on the Russell Index, and the weight of each stock is determined by its market value as well as its fundamental characteristics, such as earnings and dividends.

Definition of S&P 600 and Russell 2000

The S&P 600 and Russell 2000 are two stock market indices that track the performance of small-cap companies. The S&P 600 is composed of 600 companies that are selected by the S&P Global Market Intelligence’s U.S. Equity Committee and are chosen based on their market capitalization, liquidity, and other factors. The Russell 2000 is made up of 2,000 small-cap companies that are ranked by their market capitalization.

Reasons for Comparison

These two indices are often compared to each other due to their similarities in size and composition. Small-cap companies are considered to be more volatile and have the potential for higher returns than large-cap companies, making them attractive to investors. Comparing the performance of the S&P 600 and the Russell 2000 gives investors an idea of the overall performance of small-cap companies and can help inform their investment decisions.

Geographic Coverage

The S&P 600 SmallCap Index is designed to track the performance of small-cap stocks in the United States. This means that it includes small-cap stocks listed on the S&P Index that are based in the United States.

On the other hand, the Russell 2000 Index is designed to track the performance of small-cap stocks from the United States and Canada. This means that it includes small-cap stocks listed on the Russell Index that are based in both countries.

Market Capitalization

Market Capitalization is a measure of the total value of all a company’s outstanding shares. It is calculated by multiplying the total number of a company’s outstanding shares by the current market price of one share. The number of companies included in the calculation of Market Capitalization depends on the index or benchmark being measured. The weighting method used to calculate Market Capitalization can vary depending on the index or benchmark being measured, but the most common weighting methods are market capitalization or float-adjusted market capitalization.

Number of Companies

The number of companies in a given analysis can vary, depending on the purpose of the analysis. For example, if the analysis is looking at the performance of a particular sector, a larger sample may be needed. The weighting method used in an analysis also varies depending on the purpose. Generally, the weighting method is chosen to reflect the relative importance of the data being analyzed. Examples of weighting methods include equal-weighted, market-capitalization weighted, and price-weighted. The S&P 600 is composed of 600 small-cap stocks, while the Russell 2000 is composed of 2000 small-cap stocks. Both indexes are market capitalization weighted. The S&P 600 is composed of smaller companies with an average market capitalization of $2.1 billion, while the Russell 2000 includes larger companies with an average market capitalization of $4.4 billion.

Sector Weightings

The S&P 600 SmallCap Index is more heavily weighted towards the Information Technology and Consumer Discretionary sectors, while the Russell 2000 Index is more heavily weighted towards the Financials and Industrials sectors. This means that the S&P 600 SmallCap Index has a higher proportion of stocks from the Information Technology and Consumer Discretionary sectors compared to the Russell 2000 Index, and the Russell 2000 Index has a higher proportion of stocks from the Financials and Industrials sectors compared to the S&P 600 SmallCap Index.

Weighting Method S&P 600 vs Russell 2000

Weighting method is a statistical technique used to assign weights to different elements in a set or group in order to measure their relative importance. Weighting methods are commonly used in various research and survey studies to measure the relative importance of different factors in a given context. Weighting methods can be used to prioritize, rank, or compare elements in a set, and to make decisions about allocations or resources.

Valuation Measures

The S&P 600 SmallCap Index has a higher average price-to-earnings ratio than the Russell 2000 Index. The price-to-earnings ratio, or P/E ratio, is a measure of the price of a stock relative to its earnings per share. A higher P/E ratio indicates that a stock is more expensive relative to its earnings.

The S&P 600 SmallCap Index also has a higher average dividend yield than the Russell 2000 Index. The dividend yield is a measure of the amount of dividends paid by a stock relative to its price. A higher dividend yield indicates that a stock is paying out a larger proportion of its earnings as dividends.

Sector Representation

The sector representation of the S&P 600 and the Russell 2000 is fairly similar. Both indexes contain a high proportion of companies in the Information Technology, Financials, and Industrials sectors. The S&P 600 has a slightly higher proportion of companies in the Health Care, Consumer Discretionary, and Materials sectors.

Performance Comparison S&P 600 vs Russell 2000

The S&P 600 and Russell 2000 are both small-cap indexes, and are widely considered two of the most popular and important small-cap indexes in the market. The S&P 600 is a capitalization-weighted index that tracks the performance of small-cap companies in the US stock market, while the Russell 2000 tracks the performance of the 2,000 smallest publicly traded companies in the US. Historically, the S&P 600 has outperformed the Russell 2000, with the S&P 600 delivering an average annual return of 8.8% over the past 10 years, compared to the Russell 2000’s 6.9%. The S&P 600 has outperformed the Russell 2000 over the past 10 years. The S&P 600 has delivered a 10-year annualized return of 8.3%, while the Russell 2000 has delivered a 7.2% return. However, the Russell 2000 has outperformed the S&P 600 over the past 5 years, with a 5-year annualized return of 13.8% compared to 12.9% for the S&P 600.

Historical Performance

Over the past 10 years, the S&P 600 has outperformed the Russell 2000 by an average of 1.9% per year. The S&P 600 has had an average annual return of 8.8% over the past 10 years, compared to the Russell 2000’s 6.9%. The S&P 600 has had more consistent returns, while the Russell 2000 has seen more volatility.

Volatility S&P 600 vs Russell 2000

The S&P 600 is a less volatile index than the Russell 2000. The S&P 600 has a 10-year standard deviation of 13.3%, while the Russell 2000 has a 10-year standard deviation of 15.2%. This indicates that the S&P 600 is less likely to experience large swings in performance, while the Russell 2000 is more volatile and may experience more wild swings in performance. The S&P 600 is slightly less volatile than the Russell 2000. The S&P 600 has an average annualized volatility of 19.8%, while the Russell 2000 has an average annualized volatility of 22.3%. This indicates that the S&P 600 is less prone to large swings in its value compared to the Russell 2000.

Sentiment 

The S&P 600 is considered to have a more positive sentiment than the Russell 2000. Investors generally view the S&P 600 as a more reliable index with less risk, while the Russell 2000 is seen as more speculative. As a result, the S&P 600 typically enjoys more investor interest, while the Russell 2000 is often seen as a riskier bet.

Volume S&P 600 vs Russell 2000

The S&P 600 is more liquid than the Russell 2000. The S&P 600 has a higher trading volume than the Russell 2000, indicating that there is more liquidity in the market for S&P 600 stocks. This makes it easier for investors to buy and sell S&P 600 stocks, and allows for more efficient price discovery.

Which one is best, S&P600 vs Russell 2000?

The answer to this question is subjective, as both indices offer different advantages and disadvantages. Ultimately, it depends on the investor’s goals and objectives. If the investor is looking for a more comprehensive representation of the small-cap landscape, then the Russell 2000 may be a better choice. If the investor is looking for more liquidity, then the S&P 600 may be a better choice. Ultimately, the investor should do their own research and decide which index is best for them.

FAQ

1. What is the difference between the S&P 600 and the Russell 2000?
Answer: The S&P 600 is a small-cap index of companies with market capitalizations between $300 million and $2 billion, while the Russell 2000 is a small-cap index of companies with market capitalizations between $1 billion and $3 billion.

2. How are the two indexes composed?
Answer: The S&P 600 is composed of 600 stocks selected by Standard & Poor’s, while the Russell 2000 is composed of 2,000 stocks selected by Russell Investments.

3. How often are the two indexes updated?
Answer: The S&P 600 is updated quarterly, while the Russell 2000 is updated annually.

4. What types of companies are included in the S&P 600 and Russell 2000?
Answer: The S&P 600 includes small-cap U.S. stocks from various sectors, while the Russell 2000 includes small-cap U.S. stocks from various sectors and industries.

5. What are the benefits of investing in the S&P 600 and Russell 2000?
Answer: Investing in the S&P 600 and Russell 2000 can provide investors with exposure to small-cap stocks, which can potentially offer higher returns than larger-cap stocks. Additionally, these indexes can provide diversification and liquidity.

6. What are the risks of investing in the S&P 600 and Russell 2000?
Answer: Investing in the S&P 600 and Russell 2000 can be riskier than investing in larger-cap stocks, as small-cap companies tend to be less established and therefore more volatile. Additionally, the indexes may not accurately reflect the performance of the overall small-cap market.

7. How do I invest in the S&P 600 and Russell 2000?
Answer: Investors can invest in the S&P 600 and the Russell 2000 by purchasing index funds or exchange-traded funds (ETFs) that track the performance of the indexes.

8. What is the historical performance of the S&P 600 and Russell 2000?
Answer: The S&P 600 and Russell 2000 have both had strong historical performances, with the S&P 600 outperforming the Russell 2000 in recent years.

9. How are fees associated with investing in the S&P 600 and Russell 2000?
Answer: Fees associated with investing in the S&P 600 and Russell 2000 will vary depending on the type of investment vehicle used. Generally, index funds and ETFs will have lower fees than actively managed funds.

10. How can I stay up-to-date on news and developments related to the S&P 600 and Russell 2000?
Answer: Investors can stay up-to-date by subscribing to newsletters, reading industry news, and following financial websites and social media accounts related to the S&P 600 and Russell 2000.

Conclusion

The S&P 600 and the Russell 2000 are two different small-cap indexes that measure the performance of the U.S. small-cap market. The S&P 600 is composed of smaller companies with an average market capitalization of $2.1 billion, while the Russell 2000 includes larger companies with an average market capitalization of $4.4 billion. The S&P 600 has a slightly higher proportion of companies in the Health Care, Consumer Discretionary, and Materials sectors. The S&P 600 has outperformed the Russell 2000 over the past 10 years, while the Russell 2000 has outperformed the S&P 600 over the past 5 years. The S&P 600 is also slightly less volatile than the Russell 2000. The S&P 600 and the Russell 2000 are two major stock market indexes used to measure the performance of small-cap stocks in the United States. Although both indices are based on the same concept of measuring the performance of small-cap stocks, there are some key differences between them that investors should be aware of. The S&P 600 is an index of 600 small-cap stocks that are selected by Standard & Poor’s based on criteria such as size and liquidity. The Russell 2000, on the other hand, is an index of 2000 small-cap stocks that are selected by Russell Investments based on criteria such as market capitalization and industry sector. Both indices are widely followed by investors and offer different advantages. For example, the Russell 2000 is a better representation of the small-cap landscape due to its larger size, while the S&P 600 offers more liquidity due to its smaller size.


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