Russell 2500 Growth Index: A Comprehensive Guide to US Small-Cap Growth Investing

Introduction

The Russell 2500 Growth Index is a stock market index that measures the performance of the 2500 smallest publicly traded companies in the United States. It is a subset of the Russell 3000 Index, which is a broader measure of the US stock market. The Russell 2500 Growth Index is designed to track the performance of small-cap growth companies, which are companies that are expected to experience above-average earnings growth in the future.

History of the Russell 2500 Growth Index

The Russell 2500 Growth Index was created in 1984 by Frank Russell Company. The index is calculated daily and is published by FTSE Russell. The index is composed of 2500 companies that are selected based on their size, growth potential, and industry representation.

Components of the Russell 2500 Growth Index

The Russell 2500 Growth Index is composed of companies that meet the following criteria:

• Are incorporated in the United States
• Have a market capitalization of between $300 million and $10 billion
• Have a positive earnings per share growth rate
• Are expected to continue to experience above-average earnings growth

The index is weighted by market capitalization, with the largest companies having the greatest impact on the index's performance. The top 10 companies in the index as of June 30, 2023, are:

Performance of the Russell 2500 Growth Index

The Russell 2500 Growth Index has outperformed the Russell 3000 Index and the S&P 500 Index over the long term. Over the past 10 years, the Russell 2500 Growth Index has returned an average of 12.4% per year, compared to 10.2% for the Russell 3000 Index and 9.8% for the S&P 500 Index.

The Russell 2500 Growth Index is a more volatile index than the Russell 3000 Index and the S&P 500 Index. However, it has also provided investors with higher returns over the long term.

Benefits of Investing in the Russell 2500 Growth Index

There are a number of benefits to investing in the Russell 2500 Growth Index, including:

• Diversification: The Russell 2500 Growth Index provides investors with exposure to a wide range of small-cap growth companies. This can help to diversify an investment portfolio and reduce risk.
• Growth potential: Small-cap growth companies have the potential to experience above-average earnings growth in the future. This can lead to higher returns for investors over the long term.
• Tax efficiency: Small-cap growth companies often pay less taxes than large-cap companies. This can result in higher after-tax returns for investors.

Risks of Investing in the Russell 2500 Growth Index

There are also some risks associated with investing in the Russell 2500 Growth Index, including:

• Volatility: The Russell 2500 Growth Index is a more volatile index than the Russell 3000 Index and the S&P 500 Index. This means that the value of the index can fluctuate significantly over time.
• Company-specific risk: Small-cap companies are more likely to be affected by company-specific events, such as management changes or product failures. This can lead to volatility in the index's performance.
• Market risk: The Russell 2500 Growth Index is subject to market risk. This means that the value of the index can decline during periods of economic weakness.

How to Invest in the Russell 2500 Growth Index

There are a number of ways to invest in the Russell 2500 Growth Index, including:

• Index funds: Index funds are mutual funds or exchange-traded funds (ETFs) that track the performance of a specific index. There are a number of index funds that track the Russell 2500 Growth Index, such as the iShares Russell 2500 Growth ETF (IWO).
• Mutual funds: Mutual funds are investment funds that pool money from multiple investors and invest it in a diversified portfolio of stocks and bonds. There are a number of mutual funds that invest in small-cap growth companies, such as the Fidelity Small Cap Growth Fund (FSGRX).
• ETFs: ETFs are investment funds that trade on exchanges like stocks. ETFs that track the Russell 2500 Growth Index provide investors with a way to gain exposure to the index without having to buy individual stocks.

Conclusion

The Russell 2500 Growth Index is a stock market index that measures the performance of the 2500 smallest publicly traded companies in the United States. It is a subset of the Russell 3000 Index and is designed to track the performance of small-cap growth companies. The Russell 2500 Growth Index has outperformed the Russell 3000 Index and the S&P 500 Index over the long term. There are a number of benefits to investing in the Russell 2500 Growth Index, including diversification, growth potential, and tax efficiency. However, there are also some risks associated with investing in the index, such as volatility, company-specific risk, and market risk.

Additional Information

• The Russell 2500 Growth Index is calculated daily and is published by FTSE Russell.
• The index is composed of 2500 companies that are selected based on their size, growth potential, and industry representation.
• The index is weighted by market capitalization, with the largest companies having the greatest impact on the index's performance.
• The Russell 2500 Growth Index is a more volatile index than the Russell 3000 Index and the S&P 500 Index.
• However, it has also provided investors with higher returns over the long term.

FAQs

• What is the Russell 2500 Growth Index?
  • The Russell 2500 Growth Index is a stock market index that measures the performance of the 2500 smallest publicly traded companies in the United States. It is a subset of the Russell 3000 Index and is designed to track the performance of small-cap growth companies.
• How is the Russell 2500 Growth Index calculated?
  • The Russell 2500 Growth Index is calculated daily and is published by FTSE Russell. The index is composed of 2500 companies that are selected based on their size, growth potential, and industry representation.
• What are the benefits of investing in the Russell 2500 Growth Index?
  • There are a number of benefits to investing in the Russell 2500 Growth Index, including diversification, growth potential, and tax efficiency.
• What are the risks of investing in the Russell 2500 Growth Index?
  • There are also some risks associated with investing in the Russell 2500 Growth Index, such as volatility, company-specific risk, and market risk.
• How can I invest in the Russell 2500 Growth Index?
  • There are a number of ways to invest in the Russell 2500 Growth Index, including index funds, mutual funds, and ETFs.