The Russell 2000 Index has soared, but you might be better off looking elsewhere for quality small-cap stocks

by News Feed Editor | Jan 2, 2024 | Stock Market

The Russell 2000 Index soared 12% in December, which might reflect investors’ exuberance about the state of the U.S. economy — it appears the Federal Reserve has won its battle against inflation. But if you are looking to broaden your exposure to the stock market beyond the large-cap S&P 500
SPX,
buying shares of a fund that tracks the Russell 2000 Index
RUT
might not be the best way to do it. This is because the Russell 2000 isn’t selective — it is made up of the smallest 2,000 companies by market capitalization in the Russell 300 Index
RUA,
which itself is designed to capture about 98% of the U.S. public equity market.

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[mwai_chat context=”Let’s have a discussion about this article:nnThe Russell 2000 Index soared 12% in December, which might reflect investors’ exuberance about the state of the U.S. economy — it appears the Federal Reserve has won its battle against inflation. But if you are looking to broaden your exposure to the stock market beyond the large-cap S&P 500
SPX,
buying shares of a fund that tracks the Russell 2000 Index
RUT
might not be the best way to do it. This is because the Russell 2000 isn’t selective — it is made up of the smallest 2,000 companies by market capitalization in the Russell 300 Index
RUA,
which itself is designed to capture about 98% of the U.S. public equity market.

A better choice might be the S&P Small Cap 600 Index
SML
because S&P Global requires companies to show four consecutive quarters of profitability to be initially included in the index, among other criteria. Below is a screen of analysts’ favorite stocks among the S&P Small Cap 60 …nnDiscussion:nn” ai_name=”RocketNews AI: ” start_sentence=”Can I tell you more about this article?” text_input_placeholder=”Type ‘Yes'”]