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

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

The fund is sponsored by Vanguard. It has amassed assets over $1.09 billion, 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

With more potential comes more risk, and small cap companies, with market capitalization below $2 billion, epitomizes this way of thinking.

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. Further, growth stocks have a higher level of volatility associated with them. 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

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are 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 0.55%.

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 23.40% of the portfolio. Industrials and Information Technology round out the top three.

Looking at individual holdings, Slbbh1142 accounts for about 1.17% of total assets, followed by Vaxcyte Inc (PCVX - Free Report) and Ftai Aviation Ltd (FTAI - 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 return is roughly 23.63% so far this year and is up about 39.41% in the last one year (as of 11/25/2024). In the past 52-week period, it has traded between $162.76 and $228.43.

The ETF has a beta of 1.15 and standard deviation of 25.26% for the trailing three-year period, making it a high risk choice in the space. With about 1128 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 reasonable 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 - Free Report) and the Vanguard Small-Cap Growth ETF (VBK - Free Report) track a similar index. While iShares Russell 2000 Growth ETF has $13.22 billion in assets, Vanguard Small-Cap Growth ETF has $20.15 billion. IWO has an expense ratio of 0.24% and VBK charges 0.07%.

Bottom-Line

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also 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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