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The S&P 600 Index is one of the most widely followed "small cap" stock market indexes. The S&P 600 Index is made up of stocks selected by a committee at Standard & Poor's. To be eligible a stock must be:
Constituent selection is at the discretion of the S&P index committee and is based on the eligibility criteria. The S&P Smallcap 600 Index normally has around 600 stocks, but the number can be a few more than that if the committee deems it warranted. Sector balance, as measured by a comparison of each GISC sector's weight in S&P Smallcap 600 Index with its weight in the S&P Total Market Index, is also considered in the selection of companies for the S&P Smallcap 600 Index.
Unlike most stock market indexes, the S&P Smallcap 600 Index is not reconstituted on a regular basis. Instead, changes to index composition are made on an as-needed basis. Changes in response to corporate actions and market developments can be made at any time. Constituent changes are typically announced one to five days before they are scheduled to be implemented. S&P does not always remove from the S&P Smallcap 600 Index an existing stock that is currently violating one or more of the eligibility rules, as S&P tends to believe there is value in consistency and continuity.
There are now hundreds of companies that prepare stock market indexes, but Standard and Poor's is one of the four companies that dominate the index industry, along with MSCI, FTSE Russell, and NASDAQ. You can get a pretty good gauge of the index industry by looking at the number of exchange traded funds that are tracking indexes from particular index providers - see list of index providers for ETFs.
Since part of S&P's goal with the S&P Smallcap 600 Index is to have it be representative of the stock market as a whole based on GICS sectors, let's look at the current breakout of the Index by sector:
| S&P Smallcap 600 | Total market | |||||
|---|---|---|---|---|---|---|
| GISC Sector | # of Stocks | Market cap | % | # of Stocks | Market cap | % |
| Total | 0 | $0 | 100% | 6,181 | $45,564,201,716,268 | 100% |
When we say "total market" in this article, we are talking about all common stocks, REITs and mortgage REITs of U.S. companies that trade on the U.S. stock market. So that excludes MLPs, preferred stocks, ADRs, and investment funds, and the common stock of non-U.S. companies that trade on the U.S. stock market. In terms of market capitalization, the S&P Smallcap 600 currently captures 0.0% of the total market.
The Russell 2000 Index is another popular small cap stock market index. The Russell 2000 Index is a little simpler than the S&P Smallcap 600 Index in that the Russell 2000 Index consists of the smallest 2,000 U.S. common stocks (including REITs) based on market capitalization in the Russell 3000 Index, which consists of the largest 3,000 U.S. common stocks based on market capitalization. Let's compare the S&P Smallcap 600 Index to the Russell 2000 Index:
| S&P Smallcap 600 | Russell 2000 | |||||
|---|---|---|---|---|---|---|
| GISC Sector | # of Stocks | Market cap | % | # of Stocks | Market cap | % |
| Total | 0 | $0 | 100% | 0 | $0 | 100% |
The S&P Smallcap 600 Index is considered to be a "small cap" or "small capitalization" stock index. But as explained in our article size categories, there is no standard definition of what makes up a "small cap" stock. Each of the major index providers (MSCI, S&P, NASDAQ, FTSE Russell) uses a different approach to build "small cap" indexes. On our website, any stock with a market capitalization between $300 million and $2 billion is considered to be a small cap stock. This is a just a widely used rule of thumb that we have also chosen to use. A "mid cap" stock under our definitions is a stock with a market capitalization between $2 billion and $10 billion.
Let's look at the stocks in the S&P Smallcap 600 Index based on the size categories we use:
| S&P Smallcap 600 | Total market | |||||
|---|---|---|---|---|---|---|
| Size Category | # of Stocks | Market cap | % | # of Stocks | Market cap | % |
| Large cap | 0 | $0 | 0.0% | 588 | $39,816,183,245,520 | 87.4% |
| Mid cap | 0 | $0 | 0.0% | 936 | $4,210,286,155,791 | 9.2% |
| Small cap | 0 | $0 | 0.0% | 1,493 | $1,261,790,561,027 | 2.8% |
| Micro cap | 0 | $0 | 0.0% | 2,948 | $275,941,753,930 | 0.6% |
| Unknown | 0 | $0 | 0.0% | 216 | $0 | 0.0% |
| Total | 0 | $0 | 100% | 6,181 | $45,564,201,716,268 | 100% |
Let's look at the stocks in the S&P Smallcap 600 Index based on the size categories we use compared to the Russell 2000 Index:
| S&P Smallcap 600 | Russell 2000 | |||||
|---|---|---|---|---|---|---|
| Size Category | # of Stocks | Market cap | % | # of Stocks | Market cap | % |
| Total | 0 | $0 | 100% | 0 | $0 | 100% |
The average market cap of the S&P Smallcap 600 is $0, while the average market cap of the Russell 2000 is $0.
The S&P Smallcap 600 Index historically has had a dividend yield of around 1.2% to 1.4%. Generally, small cap stocks have a lower average dividend yield than large cap stocks.
Using the data in our database as of today, here are the current market capitalization weighted average dividend yields of the S&P Smallcap 600 compared to the Russell 1000 Index, the Russell 2000 Index and the stock market as a whole:
| Category | Stock Count | Average Dividend Yield |
|---|---|---|
| S&P 500 | 0 | 0.00% |
| Russell 1000 | 10 | 3.58% |
| S&P Smallcap 600 | 0 | 0.00% |
| Russell 2000 | 0 | 0.00% |
| Total market | 6,181 | 1.47% |
Let's look at the performance of the S&P Smallcap 600 Index using IJR, the iShares S&P Smallcap 600 ETF. As explained above, the S&P Smallcap 600 Index consists mostly of small cap stocks. How does the performance of small cap stocks compare to the total stock market? Let's compare the performance of IJR to VTI, the Vanguard Total Stock Market ETF. VTI tracks the CRSP US Total Stock Market Index.
First, let's compare the market price of IJR to VTI:
Second, let's compare the total return of IJR to VTI:
Note that on our website, when you see a "-TR" symbol, such a symbol is a symbol we invented that references our calculations of the total return of an exchange traded fund (ETF). The total return symbol, or "-TR" symbol, includes the market price performance plus any dividends from that ETF reinvested.
The takeaway from the above charts is that over long periods of time, small and mid cap stocks tend to outperform large cap stocks. One way to visualize this is to look at a "ratio symbol" that shows the market price of IJR divided by the market price of SPY, the SPDR S&P 500 Index ETF:
Let's also look at the performance of the S&P Smallcap 600 Index compared to the Russell 2000 Index. Again, we will use ETFs to make the comparison. Let's compare the performance of IJR to IWM, the iShares Russell 2000 ETF. Let's start with the market price performance:
Second, let's compare the total return of IJR to IWM, using our computed "-TR" total return symbols:
The takeaway from the above charts is that over long periods of time, the S&P Smallcap 600 Index has outperformed the Russell 2000 Index. It is not entirely clear why that has happened, and whether it will continue to happen.
One way to visualize the outperformance of the S&P Smallcap 600 compared to the Russell 2000 is to look at ratio charts of IJR and IWM compared to SPY:
Generally, small cap stocks tend to be more volatile than large cap stocks. Using the data in our database, every night, we calculate some key statistics on the securities in our database. Let's look at a few of these key statistics on the S&P 500, Russell 1000, Russell 2000, and the stock market as a whole, again using ETFs as a proxy:
| Category | Standard deviation (1) | Sharpe ratio (2) | SPY Sharpe ratio (3) | Correlation to SPY (4) |
|---|---|---|---|---|
| SPY, the SPDR S&P 500 ETF | 0.15 | 0.69 | 0.69 | 1.00% |
| IWB, the Russell 1000 ETF | 0.16 | 0.49 | 0.48 | 1.00% |
| IJR, the S&P Smallcap 600 ETF | 0.20 | 0.59 | 0.48 | 0.97% |
| IWM, the Russell 2000 ETF | 0.29 | 0.16 | 0.48 | 0.97% |
| VTI, the Vanguard total market ETF | 0.16 | 0.57 | 0.55 | 1.00% |
NOTES:
1) This is the ETF's standard deviation of returns during the ETF's lifetime. Standard deviation is one way to measure of the volatility of the returns on an investment - see what is standard deviation? A higher standard deviation indicates more volatility.
2) This is the ETF's Sharpe Ratio during its lifetime. The higher the Sharpe Ratio the better. The Sharpe Ratio is one way to measure whether the higher returns of a riskier, more volatile investment are worth it - see what is the Sharpe Ratio?
3) This is SPY's Sharpe Ratio during the same time frame of the ETF's lifetime
4) This is the ETF's correlation to SPY during its lifetime. Correlation measures how closely the market price of the ETF tracks that of the market price of SPY - see what is correlation?
The bottom line is that over long periods of time, small cap stocks tend to outperform large cap stocks, but they are more volatile. If you believe in the Sharpe Ratio, you would conclude that the extra volatility of small cap stocks is worth it. But every investor has to reach their own conclusion about what constitutes "acceptable risk".
Because the S&P Smallcap 600 Index is so widely followed, there are a lot of exchange traded funds ("ETFs") that track the S&P Smallcap 600 Index:
| Symbol | Description | Inception Date | Leverage Factor | Market cap | |
|---|---|---|---|---|---|
| IJR | iShares Core S&P Small-Cap ETF | 05/22/2000 | 1.00 | $63,744,729,500 | Analyze |
| SAA | ProShares Ultra SmallCap600 ETF | 01/23/2007 | 2.00 | $26,879,665 | Analyze |
| SBB | ProShares Short S&P SmallCap 600 ETF | 01/23/2007 | -1.00 | $15,043,966 | Analyze |
| SDD | UltraShort (2x) SmallCap 600 ETF | 01/23/2007 | -2.00 | $4,864,245 | Analyze |
| SLY | S&P Smallcap 600 ETF | 11/08/2005 | 1.00 | $1,643,794,500 | Analyze |
| VIOO | Vanguard S&P Small-Cap 600 ETF | 09/07/2010 | 1.00 | $1,069,719,385 | Analyze |
All data is a live query from our database. The wording was last updated: 02/21/2019.
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