Should iShares Russell 2000 ETF (IWM) Be on Your Investing Radar?

Designed to provide broad exposure to the Small Cap Blend segment of the US equity market, the iShares Russell 2000 ETF (IWM) is a passively managed exchange traded fund launched on 05/22/2000.

The fund is sponsored by Blackrock. It has amassed assets over $48.45 billion, making it one of the largest ETFs attempting to match the Small Cap Blend segment of the US equity market.

Why Small Cap Blend

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.

Blend ETFs usually hold a mix of growth and value stocks as well as stocks that exhibit both value and growth characteristics.

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 0.19%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.46%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Healthcare sector--about 18.30% of the portfolio. Financials and Industrials round out the top three.

Looking at individual holdings, Shockwave Medical Inc (SWAV) accounts for about 0.40% of total assets, followed by Biohaven Pharmaceutical Holding Co (BHVN) and Karuna Therapeutics Inc (KRTX).

Performance and Risk

IWM seeks to match the performance of the Russell 2000 Index before fees and expenses. The Russell 2000 Index measures the performance of the small capitalization sector of the U.S. equity market.

The ETF has lost about -25.49% so far this year and is down about -23.67% in the last one year (as of 09/30/2022). In the past 52-week period, it has traded between $163.90 and $242.56.

The ETF has a beta of 1.15 and standard deviation of 30.19% for the trailing three-year period, making it a medium risk choice in the space. With about 1980 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares Russell 2000 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, IWM is a good option for those seeking exposure to the Style Box - Small Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.

The Vanguard SmallCap ETF (VB) and the iShares Core S&P SmallCap ETF (IJR) track a similar index. While Vanguard SmallCap ETF has $37.67 billion in assets, iShares Core S&P SmallCap ETF has $59.18 billion. VB has an expense ratio of 0.05% and IJR charges 0.06%.

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
 
iShares Russell 2000 ETF (IWM): ETF Research Reports
 
iShares Core S&P SmallCap ETF (IJR): ETF Research Reports
 
Vanguard SmallCap ETF (VB): ETF Research Reports
 
Biohaven Pharmaceutical Holding Company Ltd. (BHVN) : Free Stock Analysis Report
 
ShockWave Medical, Inc. (SWAV) : Free Stock Analysis Report
 
Karuna Therapeutics, Inc. (KRTX) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research