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

Are you looking for a way to invest in small-cap growth companies in the US market? The Vanguard Russell 2000 Growth ETF (VTWG) is worth considering. This passively managed exchange traded fund was launched on September 22, 2010.

Sponsored by Vanguard, the fund has gathered over $1.05 billion in assets, which places it in the average size range for ETFs aimed at replicating the Small Cap Growth segment of the US equity market.

Why Focus on Small Cap Growth?

Small-cap companies, defined as those with market capitalizations of less than $2 billion, often present high-growth potential. However, they usually come with a higher risk compared to larger companies.

Typically, growth stocks—like those tracked by this ETF—demonstrate quicker growth rates than the broader market. They also usually have higher valuations and better sales and earnings growth figures. In a robust bull market, growth stocks can be more favorable investments than value stocks, but they tend to underperform in most other market conditions.

Cost Factors

When choosing the right ETF, costs are crucial. A lower expense ratio can mean outperformance compared to more expensive options if all other factors are equal.

VTWG boasts an annual expense ratio of just 0.15%, making it one of the more affordable choices in this investment category. Its dividend yield over the last 12 months is 0.54%.

Sector Allocation and Leading Holdings

ETFs provide diversified exposure, helping to reduce the risks associated with single stocks. Nevertheless, it's advisable to investigate the fund’s holdings before making an investment decision.

This ETF has the largest portion of its holdings in the Healthcare sector, which constitutes around 23.80% of the overall portfolio. The Industrials and Information Technology sectors follow as the next top allocations.

When examining individual holdings, you’ll find that Ftai Aviation Ltd accounts for approximately 1.14% of total assets, with other notable holdings including Sprouts Farmers Market Inc.

Evaluating Performance and Risk

The Vanguard Russell 2000 Growth ETF aims to replicate the performance of the Russell 2000 Growth Index, excluding any fees and expenses. This index reflects the performance of Russell 2000 companies with above-average price-to-book ratios and strong predicted and historical growth rates.

As of January 30, 2025, VTWG has risen by about 3.04% this year and has increased around 18.76% over the last year. In its recent 52-week span, the fund has traded between $177.52 and $229.76.

With a beta of 1.17 and a standard deviation of 24.52% over the last three years, the ETF is regarded as having a higher level of risk in comparison to other investments. With around 1126 holdings, it offers effective diversification, reducing company-specific risks.

Alternative Options

The Vanguard Russell 2000 Growth ETF holds a Zacks ETF Rank of 3, which equates to a ‘Hold’ recommendation. This rating is based on several factors, including expected returns of the asset class, expense ratio, and market momentum. Thus, VTWG represents a reasonable option for those interested in the small-cap growth investing landscape.

Investors should also take a look at other ETFs available in the growth space. The iShares Russell 2000 Growth ETF (IWO) and the Vanguard Small-Cap Growth ETF (VBK) track similar indices. IWO has assets of $12.84 billion, while VBK boasts $20.29 billion in assets. The expense ratios are 0.24% for IWO and a mere 0.07% for VBK.

The Bottom Line

For long-term investors, passively managed ETFs like VTWG can serve as excellent investment vehicles. Their popularity stems from low costs, transparency, flexibility, and tax efficiency.

To explore this ETF and others, consider screening for investment products that align with your financial goals. Additionally, staying informed through investment articles can provide you with valuable insights into the ETF market.

ETF, Investment, Growth