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

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The Vanguard Russell 2000 ETF (VTWO) was launched on 09/22/2010, and is a passively managed exchange traded fund designed to offer broad exposure to the Small Cap Blend segment of the US equity market.

The fund is sponsored by Vanguard. It has amassed assets over $5.39 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

Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.

Annual operating expenses for this ETF are 0.10%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.41%.

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.

Looking at individual holdings, Ovintiv Inc. (OVV) accounts for about 0.37% of total assets, followed by Bj's Wholesale Club Holdings Inc. (BJ) and Synaptics Inc. (SYNA).

Performance and Risk

VTWO seeks to match the performance of the Russell 2000 Index before fees and expenses. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe.

The ETF has lost about -23.02% so far this year and is down about -24.03% in the last one year (as of 06/29/2022). In the past 52-week period, it has traded between $66.31 and $98.01.

The ETF has a beta of 1.17 and standard deviation of 29.98% for the trailing three-year period, making it a medium risk choice in the space. With about 2075 holdings, it effectively diversifies company-specific risk.

Alternatives

Vanguard 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, VTWO is a reasonable 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 iShares Russell 2000 ETF (IWM) and the iShares Core S&P SmallCap ETF (IJR) track a similar index. While iShares Russell 2000 ETF has $52.44 billion in assets, iShares Core S&P SmallCap ETF has $60.68 billion. IWM has an expense ratio of 0.19% 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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Vanguard Russell 2000 ETF (VTWO): ETF Research Reports
 
BJ's Wholesale Club Holdings, Inc. (BJ) : Free Stock Analysis Report
 
Synaptics Incorporated (SYNA) : Free Stock Analysis Report
 
iShares Russell 2000 ETF (IWM): ETF Research Reports
 
iShares Core S&P SmallCap ETF (IJR): ETF Research Reports
 
Ovintiv Inc. (OVV) : Free Stock Analysis Report
 
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Zacks Investment Research

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