King Russell

This morning the Russell 2000 small cap index broke above 1000 points for the first time ever.

I took a look at the Russell data to get a better sense of where it’s been and what it’s composed of and came up with a few interesting datapoints.

For starters, the Russell 2000 has done much better than the S&P 500 over most long-term timeframes and especially since the March 2009 bottom.

On a total return basis, 10,000 invested in the Russell on March 1st 2009 has grown to $27,100 as of Friday’s close, almost a triple.

Here’s what that looks like, percentage-wise, versus the S&P 500 total return index (dividends included):

Keep in mind, also, that the Russell tends to be a lot more cyclical and sensitive than the S&P 500. It has a lot more tech and industrials in it than the large cap indices.

And while it can be more volatile in a downturn, it should be noted that its diversity makes up for it, 2000 stocks is a lot of spreading out of single-stock risk. This is offset by the lower dividend yield and financial flexibility of the companies in the index – but it typically leads the markets out of economic doldrums as stimulus and marginal improvement are more readily felt by companies with less complicated capital and bureaucratic structure.

Congrats to the little guys.