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

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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 $50.56 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

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.

Blend ETFs are aptly named, since they tend to hold a mix of growth and value stocks, as well as show characteristics of both kinds of equities.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain 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 1.19%.

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 Financials sector--about 17% of the portfolio. Industrials and Healthcare round out the top three.

Looking at individual holdings, Ovintiv Inc (OVV) accounts for about 0.41% of total assets, followed by Bjs Wholesale Club Holdings Inc (BJ) and Tenet Healthcare Corp (THC).

The top 10 holdings account for about 3.23% of total assets under management.

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 -21.90% so far this year and is down about -19.76% in the last one year (as of 05/25/2022). In the past 52-week period, it has traded between $170.60 and $242.56.

The ETF has a beta of 1.17 and standard deviation of 29.37% for the trailing three-year period, making it a medium risk choice in the space. With about 2029 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 sufficient 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 $41.25 billion in assets, iShares Core S&P SmallCap ETF has $62.06 billion. VB has an expense ratio of 0.05% and IJR charges 0.06%.

Bottom-Line

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds 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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iShares Russell 2000 ETF (IWM): ETF Research Reports
 
Tenet Healthcare Corporation (THC) : Free Stock Analysis Report
 
BJ's Wholesale Club Holdings, Inc. (BJ) : Free Stock Analysis Report
 
iShares Core S&P SmallCap ETF (IJR): ETF Research Reports
 
Vanguard SmallCap ETF (VB): ETF Research Reports
 
Ovintiv Inc. (OVV) : Free Stock Analysis Report
 
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