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Invest in the Russell 2000

This index tracks small-cap stocks with growth potential — but they can be volatile.

The Russell 2000 offers a comprehensive snapshot of the small-cap market — stocks that belong to companies with a market capitalization between USD $300 million and USD $2 billion. These stocks can outperform blue-chips, but come with some risk.

What is the Russell 2000?

The Russell 2000 is a market-cap weighted index that tracks 2,000 of the smallest-cap companies in the US. Companies within the Russell 2000 are pulled from its parent index: the Russell 3000. It helps small-cap investors gauge the US stock market.

The Russell 2000 was founded in 1984 by the Frank Russell Company, a subsidiary of the London Stock Exchange Group. Today, it’s managed by the FTSE Russell, a British data and analytics firm that maintains stock market indices.

How to invest in the Russell 2000

Because the Russell 2000 is just an index of stocks, you can’t invest in it directly. However, you can invest in individual stocks tracked by the index or buy into ETFs that track the index.

Here’s a quick look at the investment process:

  1. Pick a platform. Explore your brokerage account options across multiple platforms to find the provider that best matches your investment preferences.
  2. Open an account. You can open most brokerage accounts online, and fund by linking to an external account.
  3. Choose your securities. Use your platform’s research tools to pinpoint the stocks and ETFs that fit your investment goals.
  4. Monitor your investments. Track your investments by logging into your brokerage account.

What stocks are in the Russell 2000?

The Russell 2000 isn’t a blue chip index — it tracks 2,000 small-cap companies to offer direct insight into smaller businesses across the US. While it lacks the easily recognizable big wigs in tech and finance, these stocks present a unique opportunity for investors:

  • Achillion Pharmaceuticals Inc. (Nasdaq: ACHN)
  • AeroVironment Inc. (NasdaqGS: AVAV)
  • Biolase Inc. (NasdaqCM: BIOL)
  • Conformis Inc. (NasdaqGS: CFMS)
  • Digital Turbine Inc. (NasdaqGS: APPS)
  • EverQuote Inc. (NasdaqGS: EVER)
  • Farmer Bros. Co. (NasdaqGS: FARM)
  • Genie Energy Ltd. (NYSE: GNE)
  • Ingles Markets Inc. (NasdaqGS: IMKTA)
  • Kodiak Sciences Inc. (NasdaqGS: KOD)
  • Manhattan Associates Inc. (NasdaqGS: MANH)
  • Preferred Bank (NasdaqGS: PFBC)
  • Primerica Inc. (NYSE: PRI)
  • Standard Motor Products (NYSE: SMP)
  • Stoneridge Inc. (NYSE: SRI)
  • Vivus Inc. (Nasdaq: VVUS)

What ETFs track the Russell 2000?

Major exchange-traded funds (ETFs) that track the Russell 2000 include:

  • Direxion Daily Small Cap Bear 3X Shares (NYSEArca: TZA)
  • Direxion Daily Small Cap Bull 2X Shares (NYSEArca: SMLL)
  • Direxion Daily Small Cap Bull 3x Shares (NYSEArca: TNA)
  • iPath Long Extended Russell 2000 TR Index ETN (NYSEArca: RTLA)
  • iShares Russell 2000 ETF (NYSEArca: IWM)
  • ProShares Ultra Russell2000 (NYSEArca: UWM)
  • ProShares UltraPro Russell 2000 (NYSEArca: URTY)
  • ProShares UltraPro Short Russell2000 (NYSEArca: SRTY)
  • ProShares UltraShort Russell2000 (Nasdaq: SQQQ)
  • ProShares Short Russell2000 (NYSEArca: RWM)
  • Vanguard Russell 2000 ETF (Nasdaq: VTWO)

How is the Russell 2000 performing?

The graph below tracks how the Russell 2000 has performed historically (figures are stated in US dollars). Toggle between the options on the graph to see the data for the past month, 3 months, year or 5 years.

Why should I invest in the Russell 2000?

Investing in index funds offers a valuable diversification opportunity to a portfolio with limited assets. And for those looking to support small businesses, ETFs that track the Russell 2000 give investors a way to allocate assets to small-cap US stocks.

Investment experts suggest small-cap stocks frequently outperform large-cap stocks because of their growth potential. While most large-cap companies have already experienced the bulk of their growth, many small-cap companies are looking to expand.

What are the risks of investing in the Russell 2000?

Small-cap stocks are a double-edged sword. While their potential for growth makes them an appealing asset, they also tend to be more volatile than well-established large-cap stocks. There’s an opportunity for profit when supporting small-cap businesses, but these stocks can also be risky.

The best way to build a well-balanced portfolio is to invest in stocks and funds from multiple indices, both domestic and international.

Compare stock trading platforms

If you plan to invest in an ETF that tracks the Russell 2000, you’ll need to open a brokerage account. Compare your options to find the best fit.

Name Product Available Asset Types Stock Fee Option Fee Account Fee ETF Transaction Cost Feature Table description
OFFER
Wealthsimple Trade
Stocks, ETFs
$0
N/A
$0
Free
Get a $50 bonus when you open a Wealthsimple Trade account and deposit and trade at least $150.
Pay no commissions when you trade Canadian stocks and ETFs with Wealthsimple Trade.
Scotia iTRADE
Bonds, Options, Mutual Funds, ETFs, GICs, International Equities
$4.99-$9.99
$9.99 + $1.25 contract ($4.99 + $1.25 contract if completed 150 trades or more a quarter)
$0
$9.99 ($4.99 if completed 150 trades or more a quarter)
Pay no annual account fees.
Buy, sell and trade ETFs, Equities, Options and more with competitive commissions.
CIBC Investor's Edge
Stocks, Bonds, Options, Mutual Funds, ETFs
$4.95 - $6.95
$4.95 - $6.95 (+$1.25 per contract)
$0 if conditions met, otherwise $100/year
$6.95
$4.95 - $6.95 is applicable for online stock, ETF and option trades only. Pay $4.95 when you qualify as an Active Trader (trade 150+ times per quarter).
An intuitive and easy-to-use platform with access to a variety of tools that help you make smart decisions and trade with confidence.
Interactive Brokers
Stocks, Bonds, Options, ETFs, Currencies, Futures
Min. $1.00, Max. 0.5% of trade value
$1.50 min. per order
$0
Min. $1.00, Max. 0.5% of trade value
Extensive trading capabilities and global investment tracking.
Access market data 24 hours a day, six days a week and invest in global stocks, options, futures, currencies, bonds and funds from one single account.
Questrade
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs, International Equities, Precious Metals
$4.95-$9.95
$9.95 + $1 per contract
$0
Free
Get $50 in free trades when you fund your account with a minimum of $1,000.
Opt for self-directed investing and save on fees or get a pre-built portfolio and take some of the guesswork out.
OFFER
Qtrade Direct Investing
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs
$6.95 - $8.75
$6.95 - $8.75 + $1.25 per contract
$0 if conditions met, otherwise $25/quarter
$0 - $8.75
Get up to 50 free trades. Be one of the first 100 new Qtrade clients to use the promo code 50FREETRADES and deposit a minimum of $10,000 (or top up to $15,000 to get $150 transfer fees waived). Valid until September 30, 2021.
Qtrade Direct Investing offers low trading commissions and an easy-to-use platform with access to powerful tools and a wide selection of investment options. Trade 100 ETFs free of charge and thousands more for $8.75 or lower.
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Compare up to 4 providers

Bottom line

The Russell 2000 can help investors gauge the market for small domestic stocks. But while the companies it tracks are well-positioned for growth, their stocks tend to be more volatile than better-established businesses.

Compare investment accounts across trading platforms to find your ideal broker.

Frequently asked questions

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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