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

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Launched on 09/22/2010, the Vanguard Russell 2000 Growth ETF (VTWG - Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Small Cap Growth segment of the US equity market.

The fund is sponsored by Vanguard. It has amassed assets over $676.20 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

Sitting at a market capitalization below $2 billion, small cap companies tend to be high-potential stocks compared to its large and mid cap counterparts, but come with higher risk.

Growth stocks have higher than average sales and earnings growth rates. While these are expected to grow faster than the broader market, they also have higher valuations. Also, growth stocks are a type of equity that carries more risk compared to others. They are likely to outperform value stocks in strong bull markets but over the longer-term, value stocks have delivered better returns than growth stocks in almost all markets.

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 0.84%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Healthcare sector--about 23.70% of the portfolio. Industrials and Information Technology round out the top three.

Looking at individual holdings, Emcor Group Inc. (EME - Free Report) accounts for about 0.61% of total assets, followed by Iridium Communications Inc. (IRDM - Free Report) and Crocs Inc. (CROX - Free Report) .

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 added about 4.17% so far this year and is down about -2.05% in the last one year (as of 05/04/2023). In the past 52-week period, it has traded between $141.31 and $180.80.

The ETF has a beta of 1.15 and standard deviation of 26.86% for the trailing three-year period, making it a high risk choice in the space. With about 1103 holdings, it effectively diversifies company-specific risk.

Alternatives

Vanguard Russell 2000 Growth ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, VTWG is an outstanding option for investors seeking exposure to the Style Box - Small Cap Growth segment of the market. There are other additional ETFs in the space that investors could consider as well.

The iShares Russell 2000 Growth ETF (IWO - Free Report) and the Vanguard Small-Cap Growth ETF (VBK - Free Report) track a similar index. While iShares Russell 2000 Growth ETF has $9.31 billion in assets, Vanguard Small-Cap Growth ETF has $12.79 billion. IWO has an expense ratio of 0.23% 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.

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