Should iShares Russell 2000 Growth ETF (IWO) Be on Your Investing Radar?
The iShares Russell 2000 Growth ETF (IWO) was launched on 07/24/2000, and is a passively managed exchange traded fund designed to offer broad exposure to the Small Cap Growth segment of the US equity market.
The fund is sponsored by Blackrock. It has amassed assets over $11.93 billion, making it one of the largest ETFs attempting to match the Small Cap Growth segment of the US equity market.
Why Small Cap Growth
Small cap companies have market capitalization below $2 billion. They usually have higher potential than large and mid cap companies with stocks but higher risk.
Qualities of growth stocks include faster growth rates compared to the broader market, as well as higher valuations and higher than average sales and earnings growth rates. Something to keep in mind is the higher level of volatility that is affiliated with growth stocks. Compared to value stocks, growth stocks are a safer bet in a strong bull market, but don't perform as strongly in almost all other financial environments.
Costs
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.24%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.62%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Healthcare sector--about 26.10% of the portfolio. Industrials and Information Technology round out the top three.
Looking at individual holdings, Vaxcyte Inc (PCVX) accounts for about 0.94% of total assets, followed by Ftai Aviation Ltd (FTAI) and Insmed Inc (INSM).
The top 10 holdings account for about 7.13% of total assets under management.
Performance and Risk
IWO seeks to match the performance of the Russell 2000 Growth Index before fees and expenses. The Russell 2000 Growth Index measures the performance of the small-capitalization growth sector of the U.S. equity market. It is a subset of the Russell 2000 Index, which measures the performance of the small-capitalization sector of the U.S. equity market & approximately 51% of the total market value of the Russell 2000 Index.
The ETF has added roughly 12.89% so far this year and is up about 25.42% in the last one year (as of 09/23/2024). In the past 52-week period, it has traded between $204.07 and $289.78.
The ETF has a beta of 1.15 and standard deviation of 25.25% for the trailing three-year period, making it a high risk choice in the space. With about 1122 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares Russell 2000 Growth ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, IWO is a sufficient option for those seeking exposure to the Style Box - Small Cap Growth area of the market. Investors might also want to consider some other ETF options in the space.
The iShares S&P Small-Cap 600 Growth ETF (IJT) and the Vanguard Small-Cap Growth ETF (VBK) track a similar index. While iShares S&P Small-Cap 600 Growth ETF has $6.50 billion in assets, Vanguard Small-Cap Growth ETF has $18 billion. IJT has an expense ratio of 0.18% and VBK charges 0.07%.
Bottom-Line
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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iShares Russell 2000 Growth ETF (IWO): ETF Research Reports
Insmed, Inc. (INSM) : Free Stock Analysis Report
iShares S&P Small-Cap 600 Growth ETF (IJT): ETF Research Reports
FTAI Aviation Ltd. (FTAI) : Free Stock Analysis Report
Vanguard Small-Cap Growth ETF (VBK): ETF Research Reports
Vaxcyte, Inc. (PCVX) : Free Stock Analysis Report