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Should Vanguard Russell 2000 Growth ETF (VTWG) Be on Your Investing Radar?

Looking for broad exposure to the Small Cap Growth segment of the US equity market? You should consider the Vanguard Russell 2000 Growth ETF (VTWG), a passively managed exchange traded fund launched on 09/22/2010.

The fund is sponsored by Vanguard. It has amassed assets over $937.29 million, making it one of the average sized ETFs attempting to match the Small Cap Growth segment of the US equity market.

Why Small Cap Growth

There's a lot of potential to investing in small cap companies, but with market capitalization below $2 billion, that high potential comes with even higher risk.

While growth stocks do boast higher than average sales and earnings growth rates, and they are expected to grow faster than the wider market, investors should note these kinds of stocks have higher valuations. Additionally, growth stocks have a greater level of risk associated with them. Even though growth stocks are more likely to outperform their value counterparts in strong bull markets, value stocks have a record of delivering better returns in almost all markets than growth stocks.

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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 0.15%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 0.72%.

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 Information Technology sector--about 24.50% of the portfolio. Healthcare and Industrials round out the top three.

Looking at individual holdings, Super Micro Computer Inc (SMCI) accounts for about 3.07% of total assets, followed by Slbbh1142 and Microstrategy Inc (MSTR).

Performance and Risk

VTWG seeks to match the performance of the Russell 2000 Growth Index before fees and expenses. The Russell 2000 Growth Index measures the performance of those Russell 2000 companies with higher price/book ratios and higher predicted and historical growth rates.

The ETF has gained about 5.42% so far this year and is up roughly 20.15% in the last one year (as of 05/17/2024). In the past 52-week period, it has traded between $148.60 and $197.10.

The ETF has a beta of 1.16 and standard deviation of 24.75% for the trailing three-year period, making it a high risk choice in the space. With about 1080 holdings, it effectively diversifies company-specific risk.

Alternatives

Vanguard 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, VTWG 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 Russell 2000 Growth ETF (IWO) and the Vanguard Small-Cap Growth ETF (VBK) track a similar index. While iShares Russell 2000 Growth ETF has $11.06 billion in assets, Vanguard Small-Cap Growth ETF has $17.07 billion. IWO has an expense ratio of 0.24% and VBK charges 0.07%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Vanguard Russell 2000 Growth ETF (VTWG): ETF Research Reports

Super Micro Computer, Inc. (SMCI) : Free Stock Analysis Report

MicroStrategy Incorporated (MSTR) : Free Stock Analysis Report

iShares Russell 2000 Growth ETF (IWO): ETF Research Reports

Vanguard Small-Cap Growth ETF (VBK): ETF Research Reports

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Zacks Investment Research