Key Points
IWO charges a higher expense ratio but offers a slightly greater dividend yield than MGK.
MGK has delivered stronger five-year growth and shallower drawdowns, while IWO brings broader diversification across small-cap growth stocks.
IWO tilts heavily toward healthcare and industrials, in contrast to MGK’s tech and communication services focus.
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The Vanguard Mega Cap Growth ETF (NYSEMKT:MGK) and the iShares Russell 2000 Growth ETF (NYSEMKT:IWO) both aim to capture U.S. growth stocks, but they sit on opposite ends of the size spectrum.
MGK concentrates on the largest names in the market, while IWO tracks small-cap growth companies, giving investors very different risk and sector profiles to consider.
Snapshot (cost & size)
| Metric | MGK | IWO |
|---|---|---|
| Issuer | Vanguard | iShares |
| Expense ratio | 0.05% | 0.24% |
| 1-yr return (as of Feb. 8, 2026) | 12.81% | 14.61% |
| Dividend yield | 0.36% | 0.54% |
| Beta (5Y monthly) | 1.17 | 1.43 |
| AUM | $32 billion | $13 billion |
Beta measures price volatility relative to the S&P 500. The 1-yr return represents total return over the trailing 12 months.
MGK is more affordable with a 0.05% expense ratio, while IWO charges 0.24%. IWO offers a slightly higher dividend yield, which may appeal to those seeking modest income alongside growth.
Performance & risk comparison
| Metric | MGK | IWO |
|---|---|---|
| Max drawdown (5 y) | -36.02% | -42.02% |
| Growth of $1,000 over 5 years | $1,846 | $1,039 |
What's inside
IWO tracks small-cap U.S. stocks with growth characteristics, holding over 1,000 stocks allocated to healthcare (making up 26% of assets), technology (22%), and industrials (22%).
Its top positions — Bloom Energy, Credo Technology Group, and Fabrinet — account for only small slices of the portfolio, supporting broad diversification. The fund has a long track record, with more than 25 years in operation, and no leverage or ESG quirks to note.
MGK, by contrast, is intensely concentrated in mega-cap growth. It holds just 60 stocks, with nearly 55% allocated to technology and another 17% to communication services. Its top holdings — Nvidia, Apple, and Microsoft — collectively represent more than one-third of assets, leading to more focused and less diversified exposure than IWO.
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What this means for investors
MGK and IWO take starkly different approaches, and each carries its own set of advantages and drawbacks.
MGK focuses on mega-cap growth names, with an incredibly narrow portfolio of just 60 U.S. stocks. That limits diversification significantly, but at the same time, mega-cap stocks are often industry leaders with long histories of recovering from volatility.
IWO offers far more variety with over 1,000 holdings. However, its small-cap focus can result in greater price swings, as smaller companies are often more volatile than their larger counterparts.
Between the two funds, IWO has experienced greater historical volatility with a steeper max drawdown and higher beta. But it’s also underperformed MGK over five years, likely due in part to MGK’s top holdings experiencing staggering growth in recent years.
Because MGK is more heavily weighted toward a small selection of stocks — most of which are tech stocks — it could face more turbulence if the tech industry is hit in a future downturn. But if tech continues to thrive, MGK could have more room to grow.
Both funds carry unique risks and advantages. Investors seeking broad diversification within the small-cap sector may prefer IWO, while those looking for exposure specifically to mega-cap giants might be better off with MGK.
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Katie Brockman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Bloom Energy, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
