If you're interested in broad exposure to the Small Cap Growth segment of the US equity market, look no further than the Vanguard Russell 2000 Growth ETF (VTWG), a passively managed exchange traded fund launched on 09/22/2010.
The fund is sponsored by Vanguard. It has amassed assets over $247.13 M, making it one of the average sized 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.
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. Something to keep in mind is the higher level of volatility that is affiliated with growth stocks. 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.
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for this ETF are 0.20%, making it one of the cheaper products in the space.
It has a 12-month trailing dividend yield of 0.61%.
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 Information Technology sector--about 25.10% of the portfolio. Healthcare and Industrials round out the top three.
Looking at individual holdings, Nektar Therapeut (NKTR) accounts for about 0.81% of total assets, followed by Sage Therapeutic (SAGE) and Exact Sciences (EXAS).
The top 10 holdings account for about 5.34% of total assets under management.
Performance and Risk
VTWG seeks to match the performance of the Russell 2000 Growth Index before fees and expenses. The Russell 2000 Growth Index measures the performance of those Russell 2000 companies with higher price/book ratios and higher predicted and historical growth rates.
The ETF return is roughly 3.16% so far this year and was up about 21.31% in the last one year (as of 04/11/2018). In the past 52-week period, it has traded between $114.36 and $145.53.
The ETF has a beta of 1.14 and standard deviation of 17.18% for the trailing three-year period, making it a high risk choice in the space. With about 1192 holdings, it effectively diversifies company-specific risk.
Vanguard 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, VTWG is a good option for those seeking exposure to the Small Cap ETFs area of the market. Investors might also want to consider some other ETF options in the space.
The Vanguard Small-Cap Growth ETF (VBK) and the iShares Russell 2000 Growth ETF (IWO) track a similar index. While Vanguard Small-Cap Growth ETF has $7.32 B in assets, iShares Russell 2000 Growth ETF has $8.95 B. VBK has an expense ratio of 0.07% and IWO charges 0.24%.
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 .