Designed to provide broad exposure to the Small Cap Growth segment of the US equity market, the iShares Russell 2000 Growth ETF (IWO) is a passively managed exchange traded fund launched on 07/24/2000.
The fund is sponsored by Blackrock. It has amassed assets over $12.84 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
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.
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. Also, growth stocks are a type of equity that carries more risk compared to others. 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
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
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 0.78%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. 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 24.30% of the portfolio. Industrials and Information Technology round out the top three.
Looking at individual holdings, Ftai Aviation Ltd (FTAI) accounts for about 1.06% of total assets, followed by Sprouts Farmers Market Inc (SFM) and Insmed Inc (INSM).
The top 10 holdings account for about 7.5% 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 2.90% so far this year and is up about 18.34% in the last one year (as of 01/30/2025). In the past 52-week period, it has traded between $244.37 and $315.36.
The ETF has a beta of 1.17 and standard deviation of 24.51% for the trailing three-year period, making it a high risk choice in the space. With about 1124 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 good 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 $6.67 billion in assets, Vanguard Small-Cap Growth ETF has $20.29 billion. IJT has an expense ratio of 0.18% 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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Get it free >>iShares Russell 2000 Growth ETF (IWO): ETF Research Reports
Insmed, Inc. (INSM) : Free Stock Analysis Report
Sprouts Farmers Market, Inc. (SFM) : 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
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
