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If you're interested in broad exposure to the Small Cap Growth segment of the US equity market, look no further than 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 $12.08 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
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.
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. Even though growth stocks are more likely to outperform their value counterparts in strong bull markets, value stocks have a record of delivering better returns in almost all markets than growth stocks.
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 0.24%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.32%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. 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 27.60% of the portfolio. Information Technology and Consumer Discretionary round out the top three.
Looking at individual holdings, Intellia Therapeutics Inc (NTLA) accounts for about 0.68% of total assets, followed by Crocs Inc (CROX) and Lattice Semiconductor Corp (LSCC).
The top 10 holdings account for about 4.84% 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 gained about 7.65% so far this year and was up about 29.27% in the last one year (as of 10/21/2021). In the past 52-week period, it has traded between $223.17 and $336.63.
The ETF has a beta of 1.21 and standard deviation of 28.37% for the trailing three-year period, making it a high risk choice in the space. With about 1178 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 an excellent 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 SmallCap 600 Growth ETF (IJT) and the Vanguard SmallCap Growth ETF (VBK) track a similar index. While iShares S&P SmallCap 600 Growth ETF has $6.08 billion in assets, Vanguard SmallCap Growth ETF has $16.69 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
Lattice Semiconductor Corporation (LSCC) : Free Stock Analysis Report
Crocs, Inc. (CROX) : Free Stock Analysis Report
iShares S&P SmallCap 600 Growth ETF (IJT): ETF Research Reports
Intellia Therapeutics, Inc. (NTLA) : Free Stock Analysis Report
Vanguard SmallCap Growth ETF (VBK): ETF Research Reports
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