FTSE Global All Cap ex US Index vs FTSE All-World ex US Index

The FTSE Global All Cap ex US Index and the FTSE All World ex US Index are two international stock indices, covering a majority of the world’s non-US investable stocks. Many investment strategies and vehicles benchmark to either one of these indices. The primary difference between the FTSE Global All-Cap ex US vs FTSE All World ex US is that the Global All Cap ex US Index broader than the All World ex US. However, performance is fairly similar, as is sector and geographic exposure.

A quick note that investors cannot invest directly in an index. These unmanaged indexes do not reflect management fees and transaction costs that are associated with an investable vehicle, such as the Vanguard FTSE All-World ex-US ETF (symbol: VEU) or the Vanguard Total International Stock ETF (symbol: VXUS). A reminder that these are simply examples as this site does NOT provide investment recommendations.

Historical Performance: FTSE Global All-Cap ex US vs FTSE All World ex US

Both indices were launched in the early 2000s. Since the FTSE Global All Cap ex US Index’s launch, it has trailed the FTSE All-World ex US Index by nearly .90% annually.

However, when comparing the FTSE Global All-Cap ex US vs FTSE All World ex US over the past 10 years, then the performance differential narrows to less than .20% annually. The FTSE All World ex US still outperforms the FTSE Global All-Cap ex US, but the chart shows performance is pretty close.

Differences between FTSE Global All-Cap ex US and FTSE All World ex US

These two indices are both provided by FTSE and they are nearly identical in many respects. The primary difference is that the Global All Cap ex US is more of a total market index. The Global All-Cap ex US has 7,719 constituents, while the All-World ex US “only” has 3,563 constituents (all data as of 9/30/2022)

Geographic Exposure

Country Exposure

As their names imply, each index excludes US stocks. The top five countries are identical and the weightings are very close too. Data as of 9/30/2022.

Market Classification

The only difference in developed and emerging market exposure when comparing FTSE Global All-Cap ex US vs FTSE All World ex US seems to be a rounding error!

Market Cap Exposure

As its name suggests, the FTSE Global All Cap ex US covers more mid- and small-cap stocks primarily since it has more than double the number of constituents, as of 9/30/2022.

Sector Weights

The market cap differences do not translate into any material differences in sector exposure. As the table below shows, the sector weightings of the two indices are nearly identical as of 9/30/2022.

Final Thoughts

These two indices are quite different in some ways, but not in ways that matter very much. The FTSE Global All-Cap ex-USA Index is a much broader index than the FTSE All World ex-USA Index (with more than double the number of constituents!). However, due to the market cap weighting methodology of both indices, the additional constituents do materially impact the geographic exposure, sector weights, or performance. This is very similar to the dynamic we find with the Russell 1000 and Russell 3000 where one index is essentially a subset of another.

These two indices are very similar and recent performance has very close. Investment vehicle details like expenses, fees, taxes, and liquidity in small cap names (which the Global All-Cap ex US owns a lot of!) may be more consequential than differentials in index performance. Investors cannot invest in indices directly and should do their own research before deciding to invest in a fund that tracks either index.

Further Reading

Investors looking for global exposure that includes the US may want to read our comparison of these indices’ parents, the FTSE Global All Cap Index and FTSE All World Index.

Of course, readers can also compare the differences between the flagship MSCI “ex-USA” indices, the MSCI ACWI ex-USA and MSCI World ex-USA.

FTSE Global All Cap vs FTSE All World

The FTSE Global Cap Index and the FTSE All World Index are two global indices, covering a majority of the world’s investable stocks. Many investment strategies and vehicles benchmark to either one of these indices. FTSE Global All Cap covers many more constituents and market caps than the FTSE All World, but there is little difference in performance.

A quick note that investors cannot invest directly in an index. These unmanaged indexes do not reflect management fees and transaction costs that are associated with an investable vehicle, such as the Vanguard Total World Stock ETF (symbol: VT) or the Vanguard FTSE All-World UCITS ETF (symbol: VWRL) which is available in the UK. Interestingly the former fund (VT) changed benchmarks from the FTSE All-World Index to the FTSE Global All Cap Index in 2011. A reminder that these are simply examples as this site does NOT provide investment recommendations.

Historical Performance: FTSE Global All-Cap vs FTSE All World

Both indices were launched in the early 2000s. Since the FTSE Global All Cap Index’s launch, it has trailed the FTSE All-World Index by nearly .50% annually. Not a huge amount, but it has added up over time.

Readers know that I like to examine different time periods as the results often change. Sure enough, the FTSE Global All-Cap vs FTSE All World chart shows performance is nearly identical. Over the past 10 years, the All-World has only outperformed by .10% annually.

Differences between FTSE Global All-Cap vs FTSE All World

These two indices are both provided by FTSE and they are nearly identical in many respects. The primary difference is that the Global All-Cap is more of a total market index. The Global All-Cap has 9,527 constituents, while the All World “only” has 4,172 constituents (all data as of 9/30/2022)

Geographic Exposure

Country Exposure

The top five countries are identical and even the weights are nearly identical, as of 9/30/2022.

Market Classification

The market classification split between developed and emerging markets is also identical! Data as of 9/30/2022.

Market Cap Exposure

Interestingly, the market cap data reveals some differences. As its name suggests, the FTSE Global All Cap covers more mid- and small-cap stocks (as of 9/30/2022)

Sector Weights

The sector weights between the two indices are also nearly identical, as of 9/30/2022.

Final Thoughts

These two indices are quite different in some ways, but not in ways that matter very much. The FTSE Global All-Cap is a much broader index than the FTSE All World (with more than double the number of constituents!). However, these indices are market-cap weighted, so the thousands of additional constituents does materially impact the geographic exposure, sector weights, or performance. This is very similar to the dynamic we find with the Russell 1000 and Russell 3000.

If I was deciding between these two indices as a benchmark, I’d be indifferent. That being said, US investors will be hard-pressed to even find a fund benchmarked to the FTSE All World. So the FTSE Global All-Cap may be the default choice in the US. For investors in the UK and other regions with both choices, factors like expenses, fees, taxes, and liquidity in small cap names (which the Global All-Cap owns a lot of!) may be the deciding factors. These factors are likely much more important than performance, since the two indices have very similar performance. Investors cannot invest in indices directly and should do their own research before deciding to invest in a fund that tracks either index.

Further Reading

Investors looking for global exposure from a non-FTSE index may want to look at the MSCI World or MSCI ACWI.

Of course, readers can also compare the differences between the FTSE Global All-Cap and MSCI ACWI.

NASDAQ Composite vs NASDAQ 100

The Nasdaq Composite Index and the Nasdaq 100 Index are two widely watched indices. Despite their popularity, people often confuse the two. “The NASDAQ” Composite Index is referred to in the news and displayed on websites/TV, while the NASDAQ 100 Index seems to be the benchmark for more investable funds and strategies. Despite their similar names, a comparison of the NASDAQ Composite vs NASDAQ 100 reveals some major differences.

The NASDAQ 100 and Composite have very different compositions, slightly different weights and exposures, and performance differences have reflected that.

A quick note that investors cannot invest directly in an index. These unmanaged indexes do not reflect management fees and transaction costs that are associated with an investable vehicle, such as the Fidelity NASDAQ Composite Index ETF (symbol: ONEQ) or the Invesco NASDAQ 100 ETF (symbol: QQQ). A reminder that these are simply examples as this site does NOT provide investment recommendations.

Historical Performance: NASDAQ 100 vs NASDAQ Composite

The NASDAQ Composite Index is much older with an inception date of 1970. The NASDAQ 100 Index was launched 15 years later in 1985. Since that time, the NASDAQ 100 has outperformed the NASDAQ Composite by a wide margin.

I reviewed NASDAQ Composite vs NASDAQ 100 charts from different timeframes and found the same results. The Composite has generally performed equal to or better than the 100 over all of the timeframes that I examined.

Differences between NASDAQ Composite and NASDAQ 100

Overall, the two indices are very similar, since they are both based on the same universe of stocks. The Composite includes all securities listed on the NASDAQ exchange (over 3,700 as of Q3 2022!) , while the NASDAQ 100 includes the largest 100 stocks (technically 103 as of Q3 2022) after excluding financial stocks. The NASDAQ site publishes the index methodologies for both the Composite and 100.

Geographic Exposure

Substantially all (95%+) of each index is composed of US-based companies, so I will not include the usual tables of countries, market classification, and so on.

Market Cap Exposure

The NASDAQ 100 in composed of the 100 largest stocks on the NASDAQ exchange (excluding financials), so it has a much larger weighting to large-caps than the Composite. However, both indices use methodologies based on market-cap weighting, so large-caps dominate each index.

Below is an estimate of the market cap exposure as of 9/30/2022.

Sector Weights

Given that the NASDAQ Composite is a much broader index versus the NASDAQ 100, it is not surprising that the Composite covers more sectors and is less concentrated that the 100. Below are the sector weightings of the two indices, as of 11/2/2022.

Final Thoughts

Despite “The NASDAQ” Composite’s popularity, there are relatively few investment vehicles benchmarked to it, so many investors may just default to the NASDAQ 100 because its easier. This reminds of “The Dow” Jones Industrial Average which seems to be more popular with the general public, but is dwarfed by the S&P 500 in terms of benchmark use. Investors cannot invest in indices directly and should do their own research before deciding to invest in a fund that tracks either index.

Further Reading

Investors looking for large-cap exposure in the US may also want to consider the Russell 1000 or the S&P 500 or even the MSCI USA Index.

An international example of a widely followed index without a ton a vehicles benchmarked to it is the MSCI World ex-USA Index, while pales in comparison to the MSCI ACWI ex-USA Index.

MSCI World ex-USA vs MSCI ACWI ex-USA

The MSCI World ex-USA Index and the MSCI ACWI ex-USA Index may sound very similar, but they are quite different. MSCI ACWI ex-USA is fairly popular index, while the MSCI World ex-USA is relatively unknown. When comparing MSCI ACWI ex-USA vs MSCI World ex-USA, the primary difference is that ACWI ex-USA includes emerging market stocks while World ex-USA does not. This is consistent with the ACWI and World parent indices (which include the USA).

A quick note that investors cannot invest directly in an index. These unmanaged indexes do not reflect management fees and transaction costs that are associated with an investable vehicle, such as the iShares ACWI ex-USA ETF (symbol: ACWX). A reminder that these are simply examples as this site does NOT provide investment recommendations.

Historical Performance: MSCI World ex-USA vs MSCI ACWI ex-USA

Since the MSCI ACWI ex-USA Index’s inception in 2001, it has outperformed by an ever-so-slight .20% annually. Given that the primary difference between the indices is their exposure to emerging markets, it is no surprise that ACWI ex-USA outperformed during the first decade.

Given that emerging markets have underperformed for the last decade, it is no surprise that the MSCI ACWI ex-USA vs MSCI World ex-USA chart of the last 10 years indicates the reverse. Over this time period, the MSCI World ex-USA has outperformed by nearly 1% per year.

Current Index Composition: MSCI ACWI ex-USA vs MSCI World ex-USA

The main difference between the two indices is their inclusion/exclusion of emerging markets. However, the market cap exposure and sector weights are fairly similar, which partially explains why performance has been so similar.

Geographic Exposure

ACWI stands for All Country World Index and so the MSCI ACWI ex-USA includes stocks from a broader set of countries than the World ex-USA Index. The primary difference is the inclusion and exclusion of emerging markets.

Below are the top five country weights of the two indices, as of 9/30/2022. Note that China is not included in the World ex-USA’s top holdings.

Market Cap Exposure

The ACWI ex-USA is a much broader index with 2,274 constituents vs World ex-USA’s 887 constituents (as of 9/30/2022). Not surprisingly, the mean and median market cap of ACWI ex-USA constituents is roughly half of World ex-USA’s. However, both indices are market cap weighted, so they up both being large-cap indices (which helps explain their very similar performance).

Sector Weights

As of 9/30/2022, the sector weights on the two indices are very similar.

Concluding Thoughts

Investors cannot invest in indices directly and should do their own research before deciding to invest in a strategy that tracks either index. Below are a my personal thoughts on this comparison of MSCI World ex-USA vs MSCI ACWI ex-USA:

  • The comparison might not even matter that much, since the MSCI World ex-USA Index is not a common benchmark. This is reminiscent of the NASDAQ Composite Index, which is widely followed but has relatively few vehicles benchmarked to it (versus the NASDAQ 100)
  • Selecting the MSCI ACWI ex-USA Index over the MSCI World ex-USA Index is simply a bet on emerging markets. That is main difference between the indices as the other weights and exposures are quite similar.
  • The performance differences have not been that wide and the resources used to select the “best” benchmark might be better spent on considering differences in the investment strategy (such as expenses, transaction costs, tax efficiency, and so on.

Further Reading

Investors who want to evaluate non-MSCI global indices may want to read my comparison of the FTSE Global All Cap ex US vs FTSE All World ex US indices.

Investors who want a global benchmark with US exposure should read my comparison of the MSCI ACWI vs MSCI World (the parent indices of the two compared in this post) or my comparison of the FTSE Global All Cap Index vs MSCI ACWI.

KLD 400 Index vs S&P 500

The KLD 400 index is one of oldest socially responsible investing (SRI) indices and it still offers SRI investors an alternative to traditional indices like the S&P 500. However some differences become apparent when examining the KLD 400 vs S&P 500 and we will explore these below.

A quick note that investors cannot invest directly in an index. These unmanaged indexes do not reflect management fees and transaction costs that are associated with an investable vehicle, such as the iShares MSCI KLD 400 Social ETF (symbol: DSI) or the iShares Core S&P 500 ETF (symbol: IVV). A reminder that these are simply examples as this site does NOT provide investment recommendations.

Historical Performance: KLD 400 index vs S&P 500

The below KLD 400 vs S&P 500 chart shows that the S&P 500 has outperformed by nearly 1% annually since the KLD 400’s inception in 1990. However, similar to our analysis of the Russell 1000 vs S&P 500, the performance differential is narrower more recently.

If we shorten the KLD 400 vs S&P 500 graph timeframe to the past 15 years, the performance difference narrows. Over this timeframe the S&P index outperformed the KLD index by 50 basis points annually.

The difference in KLD 400 vs S&P 500 performance flips if we change the chart timeframe to 10 years. Over this timeframe, the KLD has outperformed by nearly a quarter percent annually. Of course, nobody knows what the future holds, but the performance over all timeframes has been relatively close (within 100 bps since inception).

Composition Differences: KLD 400 index vs S&P 500

The KLD 400 and the S&P 500 are similar in many respects. The KLD 400 index

It is worth noting that the MSCI KLD 400 index is derived from the MSCI USA index. Our analysis of the MSCI USA Index vs S&P 500 found that the two are nearly identical. However, the KLD 400 contains some ESG screens that set it apart from both the MSCI USA and the S&P 500.

ESG Methodology

According to MSCI, the MSCI USA index is the parent index of the KLD 400. The first step in deriving the KLD index is to exclude any companies involved in Nuclear Power, Tobacco, Alcohol, Gambling, Military Weapons, Civilian Firearms, GMOs, or Adult Entertainment. Then constituents are added based on ESG considerations, as well as to keep sector and market cap exposures inline with the parent index. There is additional steps taken during the semi-annual reconstitution and rebalancing, all of which can be found on MSCI’s website.

Geography

Both the MSCI KLD 400 Index and the S&P 500 only include the stocks of US-domiciled companies.

Market Capitalization: KLD 400 vs S&P 500

The market cap exposure of the KLD index and the S&P index are similar, although the KLD 400 tilts marginally more towards mid-cap and small-cap stocks.

Sector Comparison

The sector exposure of the two indices is very similar with just a few key differences. Like many ESG-oriented indices, the KLD 400 is underweight energy, utilities, and healthcare.

Final Thoughts on KLD 400 vs S&P 500

Investors cannot invest in indices directly and should do their own research before deciding to invest in a fund that tracks either index. These indices are similar in many ways and performance differentials have depended on the time period being evaluated. Those considering benchmarking to the KLD 400 index (or any SRI/ESG for that matter) should first review the index methodology. The primary reason investors would use something like the KLD 400 index is to align their portfolio with their values, so they better ensure that they agree with the index methodology!

For instance, an investor may care deeply about the environment and social issues and be drawn to the KLD 400 index as a benchmark. However, if the investor is supportive of nuclear power as an alternative to fossil fuels, then the KLD index may not be the one for them.

MSCI USA Index vs S&P 500

The MSCI USA index and the S&P 500 are two of the most popular indices of US stocks. Many portfolios and investment vehicles are benchmarked to each index as both are representative of the US stock market.

These two indices are nearly identical in every respect. The below charts of the MSCI USA vs S&P 500 performance illustrate that the S&P 500 has outperformed the MSCI USA by since its inception. However, returns over the past 25 years have been nearly identical. This is extremely similar to the findings in my analysis of the Russell 1000 vs S&P 500.

A quick note that investors cannot invest directly in an index. These unmanaged indexes do not reflect management fees and transaction costs that are associated with an investable vehicle, such as the Invesco PureBeta MSCI USA ETF (symbol: PBUS) or the iShares Core S&P 500 ETF (symbol: IVV). A reminder that these are simply examples as this site does NOT provide investment recommendations.

Historical Performance: MSCI USA Index vs S&P 500

Similar to my analysis of the Russell 3000 vs S&P 500, the time period is very important when evaluating the performance of the MSCI USA Index vs S&P 500. The below chart of the MSCI USA Index vs S&P 500 shows that the S&P 500 outperformed the MSCI USA index by about 85 basis points annually (since inception on 3/31/1986).

However, it is a completely different story if we graph the MSCI USA Index vs S&P 500 over the past 25 years (as shown in the below chart). The two indices have performed identically (down to the basis point!) at 7.43% annually.

Composition Differences: MSCI USA vs S&P 500

Both the MSCI USA Index and the S&P 500 are broad-based indices that represent the US equity markets. As of Q3 2022, the indices have identical geographic exposures, similar sector weights, and slightly different market cap exposures.

Geography

Both the MSCI USA Index and the S&P 500 only include the stocks of US-domiciled companies.

Market Capitalization

The two indices have a similar number of constituent stocks; the MSCI USA has 626 constituents versus the S&P’s 500 companies. Consequently, the MSCI USA has marginally more mid-cap exposure, but it is not a material difference. Both indices are market-cap weighted, so the composition is largely similar.

Sectors

The sector exposure of the two indices is also nearly identical.

Final Thoughts on MSCI USA vs S&P 500

Investors cannot invest in indices directly and should do their own research before deciding to invest in a fund that tracks either index. That being said, these two indices appear largely identical in terms of geographic, market cap, and sector exposure. For all intents and purposes, I would argue that these two benchmarks are interchangeable.

With such a small performance difference though, the costs of investable index strategies may be a larger consideration than which benchmark to select. Sometimes benchmark selection matters quite a bit, although that does not appear to be the case between these two indices.

Russell 3000 vs S&P 500

The S&P 500 and the Russell 3000 are two of the most popular indices of US stocks. Many portfolios and investment vehicles are benchmarked to each index as both are representative of the US stock market.

The primary difference between the two indices is that the S&P 500 is a large-cap index, while the Russell 3000 is a total market index that includes mid-cap and small-cap stocks. The below charts of the Russell 3000 vs S&P 500 performance illustrate that the S&P 500 has outperformed the Russell 1000 by a wide margin since its inception. However, returns over the past 25 years have been nearly identical. This is extremely similar to the findings in my analysis of the Russell 1000 vs S&P 500.

A quick note that investors cannot invest directly in an index. These unmanaged indexes do not reflect management fees and transaction costs that are associated with an investable vehicle, such as the State Street SPDR S&P 500 ETF (symbol: SPY) or the iShares Russell 3000 ETF (symbol: IWV). A reminder that these are simply examples as this site does NOT provide investment recommendations.

Historical Performance: Russell 3000 vs S&P 500

Similar to our analysis of the Russell 1000 vs S&P 500, the time period is very important when evaluating the performance of the Russell 3000 vs the S&P 500. The below chart of the Russell 3000 vs S&P 500 shows that the S&P 500 outperformed by a wide margin (since the Russell index’s inception in 1978). In fact, the difference is about 1.6% annually.

However, it is a completely different story if we graph the Russell 3000 and S&P 500 over the past 25 years. The two indices perform nearly identically with only a .04% difference annually!

Composition Differences: Russell 3000 vs S&P 500

Both the Russell 3000 and the S&P 500 are broad-based indices that represent the US equity markets. As of Q3 2022, the indices have identical geographic exposures, similar sector weights, and slightly different market cap exposures.

Geography

Both the Russell 3000 and S&P 500 only include the stocks of US-domiciled companies.

Market Capitalization

The biggest difference between the two indices is the market capitalization of constituents. The S&P 500 includes large-cap and mid-cap stocks, while the Russell 3000 is more of a total market index and includes large-, mid-, and small- cap stocks. However, both indices are market-cap weighted, so the composition is largely similar.

Sectors

The sector exposure of the two indices is roughly similar, which is not surprising given that they are both broad-based indices.

Final Thoughts on Russell 3000 vs S&P 500

Investors cannot invest in indices directly and should do their own research before deciding to invest in a fund that tracks either index. When deciding between the Russell 3000 and S&P 500, investors should determine if they primarily want large-cap exposure or more of a total market exposure.

With such a small performance difference though, the costs of investable index strategies may be a larger consideration than which benchmark to select. Sometimes benchmark selection matters quite a bit, although that does not appear to be the case between these two indices. Perhaps the biggest consideration beyond the usual costs, taxes, etc, is the liquidity of a small-cap exposure in the Russell 3000. There is a theoretical diversification benefit of holding more assets, but the question is at what cost?

Further Reading

As mentioned in the intro, the above analysis of the Russell 3000 vs S&P 500 is extremely similar to my analysis of the Russell 1000 vs S&P 500. For more information about these two Russell indices are so similar (and arguably interchangeable for most investors), read my analysis of the Russell 1000 vs Russell 2000 vs Russell 3000.

Russell 1000 vs Russell 2000 vs Russell 3000

The Russell 1000, 2000, and 3000 are three of the most popular indices of US stocks. Many portfolios and investment vehicles are benchmarked to each index. The Russell 1000 is composed of mostly large-cap stocks, while the Russell 2000 is composed of mostly small-cap stocks. The Russell 3000 is more of a total market index, which includes large caps, mid caps, and small caps.

A quick note investors cannot invest directly in an index. These unmanaged indexes do not reflect management fees and transaction costs that are associated with an investable vehicle. Examples include the iShares Russell 1000 ETF (symbol: IWB), the iShares Russell 2000 ETF (symbol: IWM), or the iShares Russell 3000 ETF (symbol: IWV). A reminder that these are simply examples as this site does NOT provide investment recommendations.

Difference Between Russell 1000, Russell 2000, and Russell 3000

Fortunately, FTSE Russell (the provider of the Russell indices) makes it fairly simply to understand the differences between the Russell 3000, 2000, and 1000.

Russell 3000

The Russell 3000 represents the 3,000 US stocks with the largest market caps. So it is a very broad index that covers most stocks in the US, although some microcap stocks do not make the cut. Interestingly, index inclusion is based purely on market capitalization and a webpage for the index notes: “Investors seeking to capture a strategy reflecting broad US equities performance can confidently choose the Russell 3000 knowing there are no subjective inclusions or exclusions of stocks.” This seems to be a not-so-veiled criticism of Standard & Poors, the index provider for the S&P 500 and other major indices that takes a more subjective committee-based approach. That being said, my analysis of the Russell 1000 vs S&P 500 performance did not find any differences over the past 30 years.

Russell 1000 and Russell 2000

Russell segments the Russell 3000 into two additional indices. The 1,000 stocks with the largest market caps constitute the Russell 1000, while the 2,000 stocks with the smallest market caps are the Russell 2000. The full methodology can be found on FTSE Russell’s website here.

Historical Performance: Russell 1000 vs Russell 2000 vs Russell 3000

Surprisingly, the performance of all three indices is within .15% annually over the past 44 years! Looking at the Russell 1000 vs Russell 2000 vs Russell 3000 chart below, it is clear that the Russell 1000 and Russell 3000 have moved in lockstep. The Russell 2000’s performance has more volatile, both in absolute terms as well as relative to the Russell 1000 and Russell 3000 graphs. However, the Russell 2000 has more or less arrived at the same annualized performance (as of 2022).

Current Index Composition

The near-identical performance over the past two decades is not surprising when looking at the current index compositions. As of 9/30/2022, the geographic, market cap, and sector weights are nearly identical.

Geographic Exposure

The Russell 3000 (and its component Russell 1000 and Russell 2000 indices) only includes stocks of US-based companies.

Market Cap Exposure

As mentioned above, the Russell 1000 represents the larger stocks of the Russell 3000 and the Russell 2000 represents the smaller stocks of the Russell 3000. However, since these are cap-weighted indices, the Russell 3000 ends up being closer to a large-cap index even though it contains small caps. This explains the near-identical performance of the Russell 1000 and Russell 3000.

Sector Weights

Looking at the sector weightings of the respective indices, we see a similar theme. The Russell 1000 and Russell 3000 have similar sector weights, while the Russell 2000 has some notable differences.

Final Thoughts

In my view, the Russell 1000 and Russell 3000 are equivalent and interchangeable. Yes, the Russell 3000 is more diversified in that it has more stocks, but the performance has been identical for 44 years. If it walks like a duck and talks like a duck… The Russell 2000 is obviously different which is plain to see for anyone looking at a chart of the Russell 1000 vs Russell 2000 vs Russell 3000.

The question I see many allocators face is whether to simply own the total market (something benchmarked to the Russell 3000) versus splitting equity allocations into large-cap and small-cap components. My thought is that if an investor is going to hold large-caps and small-caps at their market cap weights, then go for a total market benchmark. However, if an investor wants to overweight or underweight large-caps or small-caps, then they should divide the equity allocation.

Investors cannot invest in indices directly and should do their own research before deciding to invest in a strategy that tracks any of these indices. Investors should focus their research on details like expenses, overall costs, tracking error, and so on. These factors are especially important when evaluating something benchmarked to the Russell 2000 or Russell 3000 since small-caps stocks can be notoriously illiquid.

Further Reading

The Russell indices take a similar approach as the NASDAQ indices, where the NASDAQ 100 is a subset of the NASDAQ Composite.

Investors looking for US large-cap exposure may also want to explore the MSCI USA Index or the S&P 500 Index.

Russell 1000 vs S&P 500

The Russell 1000 and the S&P 500 are two of the most widely-followed indices of US large-cap stocks. The below charts of the Russell 1000 vs the S&P 500 illustrate that the S&P 500 has outperformed the Russell 1000 by a wide margin since its inception. However, returns over the past 30 years have been identical.

A quick note investors cannot invest directly in an index. These unmanaged indexes do not reflect management fees and transaction costs that are associated with an investable vehicle, such as the iShares Russell 1000 ETF (symbol: IWB) or the State Street SPDR S&P 500 Index Trust (symbol: SPY). A reminder that these are simply examples as this site does NOT provide investment recommendations.

Performance: Russell 1000 vs S&P 500 Historical Returns

When comparing the historical returns of the Russell 1000 and the S&P 500, it is important to note the timeframe. The performance of Russell 1000 vs S&P 500 graphs (below) look completely different during different timeframes. Since the Russell 1000’s inception in 1978, the S&P 500 has outperformed it by about 1.6% annually (through 9/30/2022).

However, charts (and marketing materials) can be deceiving. If we look at the past 30 years, the S&P 500 outperformed the Russell 1000 and the performance difference has been less than .15% annually.

This implies that more than 100% of the S&P 500’s outperformance was generated between 1978 and 1993. Sure enough, the Russell 1000 vs S&P 500 chart (below) indicates that from inception to 9/30/1992, the S&P 500 outperformed the Russell 1000 by nearly 5% per year!

Current Index Composition

The near-identical performance over the past two decades is not surprising when looking at the current index compositions. As of 9/30/2022, the geographic, market cap, and sector weights are nearly identical.

Geographic Exposure

Both the Russell 1000 and the S&P 500 only include stocks of US-based companies.

Market Cap Exposure

Both indices are primarily composed of large-cap stocks. However, since the Russell has twice as many stocks, it has slightly more mid cap constituents.

Sector Weights

The Russell 1000 and S&P 500 have nearly identical sector weightings.

Final Thoughts

In my view, these two indices are interchangeable. Yes, the S&P 500 trounced the Russell 1000 in the early years, but we’ve observed 30 years of near-identical performance.

Investors cannot invest in indices directly and should do their own research before deciding to invest in a strategy that tracks either index. Given the negligible performance difference in the indices, investors should focus their research on details like expenses, overall costs, tracking error, and so on.

Russell 1000 & S&P 500 Index Funds

As mentioned, these are two of the most widely followed indices. In fact, the three largest ETFs are S&P 500 index funds (as of 9/30/2022):

  • State Street SPDR S&P 500 ETF Trust (symbol: SPY)
  • iShares Core S&P 500 ETF (symbol: IVV)
  • Vanguard S&P 500 ETF (symbol: VOO)

Two of the largest Russell 1000 index funds include:

  • iShares Russell 1000 ETF (symbol: IWB)
  • Vanguard Russell 1000 ETF (symbol: VONE)

5s10s

One economic indicator is the US Treasury 5s10s curve or 5s10s spread, which is simply the difference between the 10-year US Treasury yield and the 5-year US Treasury yield. It is also referred to as 10s52s, 5s/10s, 10-5 yield spread and so on, but 5s10s is the most common name. There are other yield curve spreads as well, including the most popular 2s10s spread.

Below is a chart of the 5s10s through time.

How is the 5s10s calculated?

We can see how the US Treasury 5s10s spread is calculated below, by simply subtracting the 5-year yield (red line) from the 10-year yield (blue line).

What is the significance of the 5s10s?

Historically, steep yield curves (indicated by a high 5s10s reading) are often followed by strong economic and financial market performance, while flat yield curves (indicated by low 5s10s readings) are followed by weaker performance.

Sometimes the yield curve flattens so much that it “inverts” and shorter-term rates are higher than longer-term rates (and the 5s10s reading goes negative). An “inverted yield curve” is typically seen as a warning sign as inverted yield curves are often followed by recessions. The gray bars in the above charts indicate recessions.

The 5s10s seems to be one of the worst yield curve measures, in terms of predicting recessions. This measure did not invert prior to the 2020 recession (although maybe we can forgive it for not predicting a pandemic!) and it also inverted several times in the 1980s and 1990s without any immediate recession. For a brief summary of which yield curve measures have the best track record of “predicting” recessions, read this post of whether the yield curve predicts recessions.

How to track the 5s10s

You can find the US Treasury 5s10s on many websites. My favorite website to track the 5s10s is FRED (Federal Reserve Economic Data), which is published by the Federal Reserve Bank of St. Louis. The first chart (above) can also be found here.

Other yield curve spreads

There are many other yield curve spreads that market participants and policymakers monitor, such as the 2s10s, the 3-month 10-year spread, and many others. For an up-to-date look at other yield curve spreads, see our yield curve spread chart page.