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The Russell Small Cap Completeness measures the performance of the Russell 3000® Index companies excluding S&P 500 constituents.
The Russell Small Cap Completeness Index is constructed to provide a comprehensive and unbiased barometer of the extended broad market beyond the S&P 500 exposure. The Index and is completely reconstituted annually to ensure new and growing equities are reflected.
The Russell Small Cap Completeness Index is a market capitalization-weighted index that includes all Russell 3000 stocks that are not included in the Standard & Poor’s 500 Index. This structure provides investors with a diverse portfolio of small- and mid-cap assets that are uncorrelated with popularly held stocks such as Apple (AAPL) and Amazon (AMZN) (AMZN). Each year, FTSE Russell rebalances the index by excluding companies that were recently eligible for inclusion in the S&P 500. This maintains the index’s independence from the broader market and helps reduce losses during a downturn.
The Russell Small Cap Completeness Index is diversified in terms of size; the largest firm has a market capitalization of approximately $104 billion, while the average company has a market capitalization of $1.3 billion. The financial services, consumer discretionary, and technology industries account for a sizable share of the portfolio. And, unlike most other indices, each sector accounts for a sizable share of price change. Indeed, among the fund’s top holdings are Uber (UBER), Square (SQ), and Spotify (SPOT), all of which operate outside of the technology sector.
Typically, incorporating the Russell Small Cap Completeness Index into a portfolio requires the purchase of an exchange-traded fund (ETF). By December 2020, the index would have outperformed the Russell 3000 on a one-, three-, and five-year basis. Year to far, shares are up roughly 5%, outperforming the benchmark index by nearly 4%.
The advantages of investing in assets that are not connected with the wider market cannot be overstated. It provides investors with increased diversity and a technique of mitigating downside risk. Additionally, by constructing a portfolio of uncorrelated assets, one asset’s movement can partially offset a fall in another, lowering the portfolio’s average volatility. This is a critical approach for minimising big variances between organisations, often known as unsystematic or diversity risk. Occasionally, purchasing uncorrelated assets does not result in a win. In the case of a systemic catastrophe on the scale of the last recession, the majority of assets are subject to significant volatility.
Another advantage of this strategy is the possibility of profiting from outperforming assets and reinvesting the proceeds in underperformers. The Russell Small Cap Completeness Index and similar assets serve as a reminder that portfolios can benefit from uncorrelated returns when large-cap equities decline.
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This glossary post was last updated: 18th January, 2022 | 0 Views.