Russell 2000.

In plain English

The Russell 2000 is a stock market index made up of roughly 2,000 smaller US companies. It is carved out of a larger list of the 3,000 biggest US firms by taking the bottom 2,000, so it captures the small-cap part of the market. Investors watch it to see how smaller companies are doing, which often moves differently from giant companies tracked by the S&P 500. Small companies can grow faster but also swing harder, so the Russell 2000 tends to be more volatile. You can own it through index funds that copy it.

01Why it matters

Small companies behave differently from large ones, so the Russell 2000 shows you a slice of the market that an S&P 500 fund largely misses, which matters when you are deciding how to spread out your money.

02The math, step by step

Imagine the Russell 2000 rises 15 percent in a year while the S&P 500 rises 8 percent (illustrative numbers, not current data). That gap shows small companies outran large ones that year. An investor who held only an S&P 500 fund would have missed the stronger small-cap run, which is one reason some people own both.

03What this is NOT

04Receipts

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