Summary: The Russell 2000 is one of the best-known small-cap stock indices in the United States. Unlike large-cap stocks, which are often multinational corporations with sizable market caps, the companies within the Russell 2000 are more domestically focused, which makes the index appealing for investors looking to gain exposure to the US market specifically. In this guide, you will learn how to invest in Russell 2000 by buying exchange-traded funds (ETFs) through an investment platform such as eToro.
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What is the Russell 2000?
The Russell 2000 Index is a US stock market index that tracks the smallest 2,000 companies in the broader Russell 3000 Index (~7% of its market cap). Established in 1984 by the Frank Russell Company, the index is now maintained by FTSE Russell, a subsidiary of the London Stock Exchange Group (LSEG).
The index focuses on small-cap stocks, similar to how the S&P 500 is the standard for large-cap stocks. As such, it serves as a significant indicator of the health of smaller domestically-oriented companies. As of August 2024, the largest company within the index had a market capitalization of around $31.74 billion.
What stocks are in the Russell 2000?
These are the top 10 stocks in the russell 2000:
| Company | Ticker | Exchange | Percentage |
| Super Micro Computer | SMCI | NASDAQ | 1.54% |
| MicroStrategy | MSTR | NASDAQ | 0.87% |
| Comfort Systems USA | FIX | NYSE | 0.45% |
| Onto Innovation | ONTO | NYSE | 0.41% |
| Carvana | CVNA | NYSE | 0.40% |
| e.l.f. | ELF | NYSE | 0.39% |
| Fabrinet | FN | NYSE | 0.34% |
| Light & Wonder | LNW | NASDAQ | 0.33 |
| Weatherford | WFRD | NASDAQ | 0.33% |
| Abercrombie & Fitch | ANF | NYSE | 0.33% |
How to invest in Russell 2000: Step-by-step
The easiest way to invest in Russell 2000 is to invest in exchange-traded funds (ETFs) that track its performance. Some of the best Russell 2000 ETFS include:
- iShares Russell 2000 ETF (NYSEMKT:IWM): The largest Russell 2000 ETF, with almost $65 billion in assets under management;
- Vanguard Russell 2000 Growth Index Fund (NASDAQ:VTWG): A fund focused on companies with solid growth potential. It has around $1.3 billion in assets under management;
- Direxion Daily Small Cap Bull 3X Shares (NYSEMKT:TNA): A leveraged ETFs utilizing options to amplify the performance of the index. This makes it a bit riskier than standard ETFs, but it also has the potential to lead to higher profits, which makes it a solid choice for investors with greater risk tolerance.
Feature card: All three ETFs are available for investment on eToro.
To invest in a Russell 2000 ETF, simply:
- Choose the right broker;
- Open and fund your account;
- Place your order;
- Monitor your portfolio’s performance.
Step 1: Choose the right broker
First, you’ll need to open an account with a brokerage firm that offers access to Russell 2000 ETFs. Make sure you find a reputable and licensed broker that offers low trading fees, a user-friendly platform, and a wide range of investment options.
Our recommended investment platform is eToro, with over 30 million registered users and offers features like:
- Commission-free stock trading;
- Access to over 2,000 stocks from 17 different exchanges;
- Charting tools;
- The option to purchase fractional shares.
Highly Rated Stock Trading & Investing Platform
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Invest in 2,800+ stocks and other assets including 70+ cryptocurrencies and commodities.
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0% commission on buying stocks - buy in bulk or just a fraction from as little as $10. Other fees apply. For more information, visit etoro.com/trading/fees.
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Copy top-performing traders in real time, automatically.
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eToro USA is registered with FINRA for securities trading.
Step 2: Open and fund your account
Once you’ve selected a broker, it’s time to register and fund your account. Registration varies from broker to broker but mostly boils down to following simple steps and providing proof of identity in the form of a valid ID document.
The funding usually involves transferring money from your bank account to your brokerage. Most brokers offer various funding options, such as bank transfers, wire transfers, electronic funds transfers (EFTs), and third-party payments from platforms such as PayPal.
Step 3: Place your order
With your account funded, you can finally place an order and invest in Russell 2000. Simply:
- Log in to your brokerage account;
- Use the search bar to find the ETF you wish to invest in;
- Choose the amount you wish to invest;
- Choose the order type (i.e., market, limit, stop-loss, etc.);
- Review your order details one last time and submit your trade.
4. Monitor your portfolio’s performance
After investing in ETFs, it’s crucial to monitor your portfolio’s performance. Start by reviewing your holdings, tracking how your investments are trending, and setting up price alerts to keep yourself informed of significant market movements that may impact your ETFs.
Additionally, keep an eye on expense ratios, as fees can accumulate and affect your returns. Lastly, periodically revisit your long-term financial goals to ensure your ETFs can help you achieve them.
Pros and cons of investing in Russell 2000
Pros
- Diversification: Investing in an index such as Russell 2000 gives you exposure to a wide range of sectors and industries;
- Targeting small companies: The Russell 2000 is a good way to track the performance of small-cap companies;
- Cost-efficiency: Investing in indexes is often more cost-effective than investing in multiple companies separately;
- Liquidity: Russell 2000 ETFs tend to have high liquidity.
Cons
- Volatility: Smaller companies such as those within Russell 2000 are more volatile;
- Limited dividends: Smaller companies usually pay lower or no dividends.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
FAQs about how to invest in Russell 2000
Can you invest in the Russell 2000?
Yes, you can invest in Russell 2000.
How to invest in Russell 2000?
The best way to invest in Russell 2000 is to invest in ETFs that track its performance.
What ETF tracks the Russell 2000?
Some of the best Russell 2000 ETFs include iShares Russell 2000 ETF (NYSEMKT:IWM), Vanguard Russell 2000 Growth Index Fund (NASDAQ:VTWG), and Direxion Daily Small Cap Bull 3X Shares (NYSEMKT:TNA).
How does the Russell 2000 Index work?
The Russell 2000 is a capitalization-weighted index, so the weight of each company it tracks is based on its market capitalization. That means larger companies have a greater influence on the overall value of the index. Since market capitalizations fluctuate regularly, the Russell 2000 is recalibrated annually.
What is the Russell 2000 made up of?
Russell 2000 comprises a wide range of companies from various sectors, such as finance, healthcare, technology, industrials, energy, real estate, and more.
Is Russell 2000 a good investment?
Russell 2000 can be a good buy for investors looking to gain exposure to smaller companies in the US. However, smaller companies are usually more volatile, so the index is more suited for investors with a higher risk tolerance.
Highly Rated Stock Trading & Investing Platform
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Invest in 2,800+ stocks and other assets including 70+ cryptocurrencies and commodities.
-
0% commission on buying stocks - buy in bulk or just a fraction from as little as $10. Other fees apply. For more information, visit etoro.com/trading/fees.
-
Copy top-performing traders in real time, automatically.
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eToro USA is registered with FINRA for securities trading.
