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Learning, Sharing, and Teaching => Investor Alley => Topic started by: MikeBear on January 06, 2015, 12:53:49 PM

Title: Russell 3000 and Russell 2000?
Post by: MikeBear on January 06, 2015, 12:53:49 PM
 Can anybody explain the difference between the Russell 3000 and Russell 2000 funds? I hear a lot about the 2000 one, but not much about the 3000 one.

My 401k with T. Rowe Price has for choices the Russell 3000, target date funds, bonds, foreign funds, but NO real "S&P 500" fund.

Would the Russell 3000 make a good alternative? It seems to have some wild swings...

Thanks!
Title: Re: Russell 3000 and Russell 2000?
Post by: DrF on January 06, 2015, 12:59:50 PM
http://www.russell.com/documents/indexes/us-index-comparison.pdf

russell 3000 = 1000 more stocks than russell 2000
Title: Re: Russell 3000 and Russell 2000?
Post by: MikeBear on January 06, 2015, 01:07:07 PM
http://www.russell.com/documents/indexes/us-index-comparison.pdf

russell 3000 = 1000 more stocks than russell 2000

Ha Ha! I figured out that part easily enough. I just want to make sure the Russell 3000 would be a fund anybody would prefer to have. It seems like a good one...
Title: Re: Russell 3000 and Russell 2000?
Post by: seattlecyclone on January 06, 2015, 01:11:53 PM
The Russell 3000 is the largest 3,000 US companies. The Russell 1000 is the largest 1,000 of these and the Russell 2000 is the rest. A Russell 2000 fund would be a mid-cap/small-cap option, while a Russell 3000 fund would be more of a total market fund.
Title: Re: Russell 3000 and Russell 2000?
Post by: DrF on January 06, 2015, 01:21:27 PM
I know, I was just messin' with you.

either way is good, depending on the ERs.

Go with the lower ER and you'll be fine.
Title: Re: Russell 3000 and Russell 2000?
Post by: MikeBear on January 06, 2015, 02:25:36 PM
The Russell 3000 is the largest 3,000 US companies. The Russell 1000 is the largest 1,000 of these and the Russell 2000 is the rest. A Russell 2000 fund would be a mid-cap/small-cap option, while a Russell 3000 fund would be more of a total market fund.

Ok, it seems to me a 'total market fund' would be more preferred than just a S&P 500 fund.

Also thanks to DrFunk for posting the comparison link.
Title: Re: Russell 3000 and Russell 2000?
Post by: skyrefuge on January 06, 2015, 02:42:30 PM
http://www.russell.com/documents/indexes/us-index-comparison.pdf

russell 3000 = 1000 more stocks than russell 2000

I know you were just messing around, and maybe doing a little deserved LMGTFY (http://lmgtfy.com/?q=russell+3000+vs.+russell+2000), but since it's not obvious that you actually understand the difference, and surely many other people don't (since it's not intuitive), it's worth being explicit about it again as seattlecyclone was.

If I told you:


and asked "What then is the Russell 2000?"

I bet 80% of 5- to 85-year-olds would say

"it's the 2000 largest US companies".

Because that's a lot more intuitive than the real answer, which is that it's Companies 1001-3000.

So again, "go with the lower ER" isn't really a good answer for someone looking for an alternative to an S&P 500 fund, because the Russell 2000 is essentially the opposite of an S&P 500 fund, explicitly avoiding the large-cap companies in the S&P 500 index.

In this case, yes, the Russell 3000 is probably your best alternative to an S&P 500 fund (from my understanding a big reason S&P 500 funds are more popular than total-market funds is just because they were around first, not because they're "better").
Title: Re: Russell 3000 and Russell 2000?
Post by: DrF on January 06, 2015, 03:15:31 PM
http://www.russell.com/documents/indexes/us-index-comparison.pdf

russell 3000 = 1000 more stocks than russell 2000

I know you were just messing around, and maybe doing a little deserved LMGTFY (http://lmgtfy.com/?q=russell+3000+vs.+russell+2000), but since it's not obvious that you actually understand the difference, and surely many other people don't (since it's not intuitive), it's worth being explicit about it again as seattlecyclone was.

If I told you:

  • Russell 1000 is the 1000 largest US companies
  • Russell 3000 is the 3000 largest US companies

and asked "What then is the Russell 2000?"

I bet 80% of 5- to 85-year-olds would say

"it's the 2000 largest US companies".

Because that's a lot more intuitive than the real answer, which is that it's Companies 1001-3000.

So again, "go with the lower ER" isn't really a good answer for someone looking for an alternative to an S&P 500 fund, because the Russell 2000 is essentially the opposite of an S&P 500 fund, explicitly avoiding the large-cap companies in the S&P 500 index.

In this case, yes, the Russell 3000 is probably your best alternative to an S&P 500 fund (from my understanding a big reason S&P 500 funds are more popular than total-market funds is just because they were around first, not because they're "better").

As I usually do, I input my own bias into my answers.

I don't care if it is an s&p500 fund or a total market etc. For beginning investors I recommend the lowest cost index fund (which usually turns out to be similar to an s&p500 or total market). But I prefer the mid/small caps over the long term, and that's why I say it doesn't matter.

That is also why I included the link so that he could read for himself. I do not apologize that I didn't summarize. The pdf seemed very clear to me.
Title: Re: Russell 3000 and Russell 2000?
Post by: innerscorecard on January 07, 2015, 12:37:28 AM
If you Google the ticker for the fund you will usually be able to find the fund prospectus and holdings. Know exactly what it is you own, or you may be in for a nasty surprise.
Title: Re: Russell 3000 and Russell 2000?
Post by: MikeBear on January 07, 2015, 01:05:46 AM
Here's the prospectus:

http://www3.troweprice.com/rws/rps/public/assets/ffs/NTRUS.pdf (http://www3.troweprice.com/rws/rps/public/assets/ffs/NTRUS.pdf)