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Beacon Equity Research

Russell 1000 Index

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.

The table below lists the current top ten holdings in the Russell 1000 Index:
CompanyTickerWeight (%)
General ElectricGE3.0%
Exxon MobilXOM2.6%
MicrosoftMSFT2.3%
PfizerPFE2.3%
CitigroupC2.1%
IntelINTC1.6%
Bank of AmericaBAC1.5%
Johnson & JohnsonJNJ1.5%
American Intl.AIG 1.4%
Cisco SystemsCSCO1.4%
This table shows the top ten sectors represented in the Russell 1000 Index:
Sector% of Index
Financial Services21.2%
Healthcare14.0%
Industrial Materials11.1%
Hardware11.0%
Consumer Goods8.9%
Consumer Services8.7%
Energy6.4%
Media4.3%
Business Services4.2%
Software4.0%

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.