What Is the Russell Microcap Index?
The Russell Microcap Index consists of the smallest 1,000 securities inside the small-cap Russell 2000 Index, plus the next 1,000 smallest eligible securities in keeping with a mixture of their market capitalization and provide index membership weight.
The huge index is designed to offer an impartial choice of the smallest tradable securities that still meet industry tick list prerequisites, so over-the-counter (OTC) stocks and crimson sheet securities are excluded.
Key Takeaways
- The Russell Microcap index covers the smallest stocks inside the Russell 2000 with market caps between more or less $50 million and $300 million.
- The Russell Microcap Index is constructed to provide an entire and impartial barometer for the microcap section purchasing and promoting on national exchanges.Â
- Microcaps tend to be riskier and additional volatile than large-cap stocks, then again can also produce diamonds inside the tricky with above-average growth imaginable.
Understanding the Russell Microcap Index
While the Russell 2000 is basically probably the most again and again quoted small-cap index, the Microcap Index is a treasured software for examining dispositions in smaller, startup corporations known as micro-caps. The Index is completely reconstituted yearly to ensure new and emerging equities are reflected and firms continue to replicate appropriate capitalization and value characteristics.Â
The prevailing index’s top 5 sector weightings are financial services, healthcare, consumer discretionary, producer durables, and technology. Healthcare (combining prescribed drugs and biotech) names make up 4 of its 10 largest holdings.
The Microcap Index represents just a small fraction of the entire U.S. equity market by means of capitalization. As of October 2020, the index’s stock with {the marketplace} cap was once S2.89 billion, with a median stock worth of merely $256 million. The absolute best 10 index constituents as of that time were as follows:
- Overstock Com Inc (consumer discretionary)
- Digital Turbine Inc (consumer discretionary)
- Sorrento Therapeutics (healthcare)
- Workhorse Body of workers Inc (industrials)
- Vivint Solar Inc (consumer discretionary)
- Kura Oncology Inc (healthcare)
- Cryoport Inc (industrials)
- Owens & Minor Inc (healthcare)
- Maxar Technologies Inc (industrials)
- Seres Therapeutics Inc (healthcare)
Other Russell Microcap Indices
Along side the Microcap Index, Russell maintains a Microcap Growth (with 869 holdings) and a Microcap Worth Index (1,058 holdings).
The Russell Microcap Growth Index measures the potency of the microcap growth section of the U.S. equity market. It accommodates Russell Microcap corporations which may also be regarded as further growth oriented relative to the entire market as defined by means of Russell’s primary style means. In a similar fashion, the Russell Microcap Worth Index accommodates Russel Microcap corporations which may also be regarded as further value-oriented.
Investing in Microcap Stocks
Microcap stocks make up less than 3% of the U.S. equity market. The ones smaller company stocks are tricky to spend money on given vital issues of liquidity and thin purchasing and promoting volumes. Patrons taking a look to reach exposure to the asset class must purchase an industry traded fund (ETF) that replicates the Russell Microcap Index from iShares, which trades beneath the ticker (IWC).
Alternatively there are very important permutations between the benchmark index itself and the iShares’ fund. For example, IWC has roughly 1,400 holdings with its 10 largest holdings all inside the healthcare sector, followed by means of financials, information technology, consumer discretionary, and industrials that round up the absolute best 5 sector weights.
