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 $9.54 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.
While growth stocks do boast higher than average sales and earnings growth rates, and they are expected to grow faster than the wider market, investors should note these kinds of stocks have higher valuations. Also, growth stocks are a type of equity that carries more risk compared to others. 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 0.44%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. 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 25.40% of the portfolio. Information Technology and Industrials round out the top three.
Looking at individual holdings, Usd Cash (USD) accounts for about 0.73% of total assets, followed by Shockwave Medical Inc (SWAV) and Halozyme Therapeutics Inc (HALO).
The top 10 holdings account for about 5.12% 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 lost about -22.80% so far this year and is down about -24.70% in the last one year (as of 08/31/2022). In the past 52-week period, it has traded between $194.20 and $327.35.
The ETF has a beta of 1.18 and standard deviation of 30.90% for the trailing three-year period, making it a high risk choice in the space. With about 1148 holdings, it effectively diversifies company-specific risk.
IShares Russell 2000 Growth 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, IWO is a good option for those seeking exposure to the Style Box - Small Cap Growth area of the market. Investors might also want to consider some other ETF options in the space.
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 $5.72 billion in assets, Vanguard SmallCap Growth ETF has $12.54 billion. IJT has an expense ratio of 0.18% and VBK charges 0.07%.
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 Growth ETF (IWO): ETF Research Reports
Halozyme Therapeutics, Inc. (HALO): Free Stock Analysis Report
iShares S&P SmallCap 600 Growth ETF (IJT): ETF Research Reports
Vanguard SmallCap Growth ETF (VBK): ETF Research Reports
ProShares Ultra Semiconductors (USD): ETF Research Reports
ShockWave Medical, Inc. (SWAV): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.