Russell Midcap Index: What it Means, How it Works

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Adam Hayes
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Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

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Updated March 25, 2024
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Gordon Scott
Reviewed by Gordon Scott
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Gordon Scott has been an active investor and technical analyst or 20+ years. He is a Chartered Market Technician (CMT).

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What Is the Russell Midcap Index?

The Russell Midcap Index is a market capitalization-weighted index comprising 800 publicly traded U.S. companies. It selects the 800 smaller companies from the Russell 1000 Index, though they account for only about 27% of the total capitalization of the Russell 1000. The index serves as a snapshot of midsized American firms, offering a balance of growth potential and stability for investors interested in this market.

As of the first quarter of 2024, the average Russell Midcap Index company had a market cap of $26.8 billion (and a median of $11.1 billion). The index is reconstituted annually so that stocks that have outgrown it can be removed and new entries added.

Key Takeaways

  • The Russell Midcap Index provides a market-capitalization-weighted gauge of the 800 smallest U.S. publicly traded companies among the Russell 1000.
  • The index is the most widely followed midcap index, and mutual and exchange-traded funds are designed to track its performance.
  • Midcap stocks balance the growth potential of small caps and the stability of large caps.
  • The midcap index's composition is redone yearly to keep it representative of its target firms.

Basics of the Russell Midcap Index

The Russell Midcap Index is a subset of the Russell 1000 and the Russell 3000. The 800 companies in the Russell Midcap Index are four-fifths of Russell's large-cap index, the Russell 1000, which compiles the largest 1,000 publicly traded companies.

The Russell indexes, each with a different focus, comprehensively track the U.S. stock market. The Russell 3000 Index contains the stocks of the 3,000 largest U.S. companies based on market capitalization. The Russell 1000 Index is derived from that larger index, tracking the top 1,000 stocks. Then comes the Russell Midcap Index, which gauges the performance of those companies ranked 201 to 1000 in the Russell 3000.

Investors and fund managers in the midcap market have few good indexes against which to benchmark their returns, making the Russell Midcap Index particularly valuable for assessing how particular funds are performing.

Defining Midcap

"Midcap" refers to companies with a medium-sized market capitalization (value), currently around $2 billion to $10 billion. These figures, however, are flexible and have changed with market conditions, trends in corporate valuations, and inflation.

As the name implies, a midcap company falls between large-cap (or big-cap) and small-cap firms. This middle range typically consists of companies undergoing growth and expansion with the potential to offer higher returns than larger, more established firms. Yet, they don't usually have the risks found with small-cap stocks.

Hence, some investors see midcap stocks as a way to diversify risk. Small-cap stocks offer the most growth potential, but that growth comes with the most risk. Large-cap stocks offer the most stability, but they offer lower growth prospects. Midcap stocks represent a hybrid of the two.

What Other Midcap Indexes Are There?

Along with the Russell Midcap Index, five other major indexes track U.S. midcap stocks: the CRSP U.S. Mid Cap Index (CRSPMI1), the Dow Jones U.S. Midcap Total Stock Market Index (DWM), the S&P MidCap 400 Index (SP400), the MSCI US Mid Cap 450 Index, and the Wilshire US Midcap Index.

What Are the Top-5 Biggest Companies in the Russell Midcap Index?

As of the first quarter of 2024, the five largest companies in the Russell Midcap Index by market capitalization are as follows:

  1. KKR & Co. (KKR): $87.3 Billion
  2. CrowdStrike Holdings (CRWD): $79.1 Billion
  3. Parker Hannifin Corp (PH): $70.2 Billion
  4. Trane Technologies PLC. (TT): $68.0 Billion
  5. Amphenol Corp. (APH): $67.3 Billion

Why Is the Russell Midcap Index Rebalanced?

The Russell MidCap Index is rebalanced annually, typically in June. This involves updating the list of index constituents to reflect changes in market capitalization and stock rankings. During rebalancing, companies that have grown to move into the large-cap category may be moved to the Russell 1000 Index, while those that have decreased in size may transition to the Russell 2000 Index. This ensures that the Russell MidCap Index reflects the midsized segment of the U.S. equity market.

How Can Investors Gain Exposure to the Russell Midcap Index?

Investors can gain exposure to the Russell MidCap Index through mutual funds and exchange-traded funds that aim to replicate the performance of the index. The iShares Russell Midcap ETF (IWR) is a good example.

The Bottom Line

The Russell Midcap Index comprises the 800 largest stocks in the Russell 1000 index. It plays a crucial role in portfolio diversification by offering exposure to the midcap segment of the market, which is often viewed as a good balance between small-cap volatility and large-cap stability. Midcap companies can offer growth potential like small caps, with some of the financial stability found in larger companies.

Article Sources
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  1. FTSE Russell. "Russell Midcap Index."

  2. FTSE Russell. "Fact Sheet: Russell 1000."

  3. FTSE Russell. "Fact Sheet: Russell 3000 Index."

  4. Financial Industry Regulatory Authority. "Market Cap Explained."

  5. S&P Global. "Mid Cap: A Sweet Spot for Performance."

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