Overview:
Started in 1984, the Russell 3000 Index attempts to capture the return of the overall market. The index can be subdivided into two segments: the Russell 1000 large-cap and Russell 2000 small-cap. The delineation is clear enough--the Russell 1000 represents the 1000 largest stocks in the index (based on market cap), while the remaining 2000 are placed in the Russell 2000. Because of its broad diversification and large number of holdings, this index often makes for a popular alternative to the Wilshire 5000 total market index.

Composition:
The Russell 3000 Index is comprised of the 3000 largest and most liquid stocks based and traded in the U.S. The U.S.-based requirement disqualifies many large international firms from inclusion into the index--names such as Unilever, Schlumberger and Seagrams, just to name a few. The components of the Russell 3000 Index account for roughly 98% of the total value of all equity traded on U.S. exchanges, making this a very broad index indeed. The index is market-cap weighted, so the largest firms have the biggest impact on the index’s value. As you can see from the tables below, the index's top 10 holdings are identical to those of the Russell 1000 index (which is simply a subset of this index). However, the overall weighting assigned to these top holdings is slightly lower when it comes to the Russell 3000 (due to its broader diversification).

Positives:
This index captures virtually the entire return posted by U.S.-based stocks. The more stringent requirements for inclusion also probably make it a better representation of the universe of actively traded stocks when compared to the Wilshire 5000.

Drawbacks:
Most investors consider the Wilshire 5000 to be the benchmark for total market returns. Even if it includes stocks that are almost impossible to trade, that index contains more equities and thus gets more focus. Although the Russell 3000 gets little attention, its two subsets, the 1000 & 2000, are widely followed. After noticing that large indices consistently lag behind smaller, more focused ones, many investors are beginning to wonder if there is such a thing as “too much” diversification. Is it only a matter of time before someone launches a “world index” that contains all equities traded in every country and renders other total market indices obsolete?

How can I trade/invest in this index?
A variety of different mutual funds and ETFs track the Russell 3000 Index. Our favorite way to trade this index is through an investment in the iShares Russell 3000 (symbol IWV). This ETF closely tracks the index's returns, is relatively liquid, and charges an extremely low 0.20% expense ratio. Thanks to its status as an ETF, investors can buy or sell the iShares Russell 3000 anytime during normal trading hours, just like a common stock.

Additional Information:  
Russell 3000 Index Fact Sheet  
iShares Russell 3000 Index Fund (IWV)  

Income Security of the Month Our "Income Security of the Month" for May 2008 invests in a fast-growing overseas market that doesn't get much exposure in the mainstream financial press. And although it typically makes enormous annual dividend payments -- it has paid an average dividend of 24.5% per year over the past five years -- this fund is perhaps most appealing for its total return potential. Specifically, the fund has delivered total returns of +297.3% since 2003, and it ranks in the top 10% of its category over the past decade.

Top 10 Stocks for 2008! Since we began publishing this report back in 2003, the picks we've featured have consistently beaten the broader market -- delivering average gains of +21.3% per year and outperforming the S&P by a nearly 2-to-1 margin. Act now to reserve your copy of our newest report -- Top Ten Stocks for 2008.