Should iShares Russell 2000 Growth ETF (IWO) Be on Your Investing Radar?
Looking for broad exposure to the Small Cap Growth segment of the US equity market? You should consider the iShares Russell 2000 Growth ETF (IWO), a passively managed exchange traded fund launched on 07/24/2000.
The fund is sponsored by Blackrock. It has amassed assets over $9.31 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
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.
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. Something to keep in mind is the higher level of volatility that is affiliated with growth stocks. When you consider growth versus value, growth stocks are usually the clear winner in strong bull markets but tend to fall flat in nearly all other environments.
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 0.23%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.80%.
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, Shockwave Medical Inc (SWAV) accounts for about 0.66% of total assets, followed by Crocs Inc (CROX) and Emcor Group Inc (EME).
The top 10 holdings account for about 5.93% 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 about 4.99% so far this year and was up about 1.25% in the last one year (as of 05/08/2023). In the past 52-week period, it has traded between $194.20 and $248.43.
The ETF has a beta of 1.15 and standard deviation of 26.97% for the trailing three-year period, making it a high risk choice in the space. With about 1099 holdings, it effectively diversifies company-specific risk.
IShares 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, IWO is a great 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 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 $4.80 billion in assets, Vanguard Small-Cap Growth ETF has $13.05 billion. IJT has an expense ratio of 0.18% and VBK charges 0.07%.
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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iShares Russell 2000 Growth ETF (IWO): ETF Research Reports
EMCOR Group, Inc. (EME) : Free Stock Analysis Report
Crocs, Inc. (CROX) : Free Stock Analysis Report
iShares S&P Small-Cap 600 Growth ETF (IJT): ETF Research Reports
Vanguard Small-Cap Growth ETF (VBK): ETF Research Reports
ShockWave Medical, Inc. (SWAV) : Free Stock Analysis Report
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