RUT is the acronym for the Russell 2000, an index comprised of the smallest 2000 stocks in the Russell 3000. Investors typically watch this small-cap index to measure the performance of smaller, domestically focused businesses in the United States.
Significantly, the RUT is the most prominent index to track small-cap stocks, and the index is weighted by shares outstanding. This means the index is influenced by a member stock’s last sale price and the number of shares available to be traded rather than the company’s entire market cap. It is a free-floating index maintained by FTSE Russell, a subsidiary of the London Stock Exchange Group.
Russell 2000 performance
As of January 2022, the Russell 2000 has a five-year annualized return of 9.94%. Compared to the S&P 500, which has a five-year annualized return of 16.93%, the RUT underperforms because small-cap companies have weaker competitive advantages and tend to be less profitable than large-cap companies that make up the S&P 500. Small-cap stocks in the RUT are also less liquid, increasing trading costs and hurting their performance.