Overview:
The Russell 1000 is designed to track the performance of most major large-cap companies. Though it is not usually cited by individual investors, it is the third most widely used benchmark by money managers (behind the S&P 500 and the Russell 2000). While most individual investors will look at the S&P 500 as a gauge for the overall market, the Russell 1000 is useful for those who want to track an even broader market segment.

Composition:
As the name implies, the Russell 1000 contains 1000 component stocks. The index is a subset of the much larger Russell 3000 Index--it simply contains the 1000 largest stocks within that index. The components of the Russell 1000 Index account for about 90% of the equity traded on the U.S. exchanges. The index is market cap weighted, meaning that the largest firms have the greatest impact on the index's returns. The index's components range in size from $1 billion to more than $300 billion (based on market cap), with average firm carrying a market cap of around $80 billion. The index is highly diversified, as its component stocks are involved in just about every sector imaginable. Even though the top 10 holdings represent 20% of the index’s value, this is still not as high as other comparable indexes.

Positives:
The Russell 1000 contains a deeper range of stocks than the more widely cited Dow Jones Industrial Average or the S&P 500. For many fund managers, this index represents the universe of large, liquid stocks that are suitable for investment. Because of this, the Russell 1000 is a good benchmark for many managers.

Drawbacks:
Since the largest components in the index are so heavily weighted, most individual investors will see little gain from investing or tracking this index instead of the S&P 500. After all, thanks to the heavy weighting of large stocks, the returns posted by both indices tend to be very similar. It's also worth noting that the Russell 3000 usually outperforms the 1000 by a small margin, due in large part to the inclusion of smaller, higher-growth firms.

How can I trade/invest in this index?
Several mutual funds and ETFs track the performance of the Russell 1000 Index. Our favorite way to trade the index is through an investment in the iShares Russell 1000 Fund (symbol IWB). Thanks to its status as an ETF, investors can buy or sell this fund throughout the trading day just like a common stock. It also carries a very low 0.15% expense ratio.

Additional Information:
Russell 1000 Index Fact Sheet  
iShares Russell 1000 Index Fund (IWB)

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