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Should iShares Russell 2000 Growth ETF (IWO) Be on Your Investing Radar?

Style Box ETF report for IWO

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This story originally appeared on Zacks

Looking for broad exposure to the Small Cap Growth segment of the US equity market? You should consider the iShares Russell 2000 Growth ETF (IWO), a passively managed exchange traded fund launched on 07/24/2000.

- Zacks

The fund is sponsored by Blackrock. It has amassed assets over $11.61 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

Small cap companies have market capitalization below $2 billion. They usually have higher potential than large and mid cap companies with stocks but 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. Compared to value stocks, growth stocks are a safer bet in a strong bull market, but don't perform as strongly in almost all other financial environments.

Costs

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 0.33%.

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 Healthcare sector--about 26.40% of the portfolio. Information Technology and Industrials round out the top three.

Looking at individual holdings, Crocs Inc (CROX) accounts for about 0.65% of total assets, followed by Lattice Semiconductor Corp (LSCC) and Intellia Therapeutics Inc (NTLA).

The top 10 holdings account for about 5.65% 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 -0.37% so far this year and is down about -2.08% in the last one year (as of 12/21/2021). In the past 52-week period, it has traded between $278.74 and $336.63.

The ETF has a beta of 1.18 and standard deviation of 28.20% for the trailing three-year period, making it a high risk choice in the space. With about 1227 holdings, it effectively diversifies company-specific risk.

Alternatives

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 outstanding 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 $6.43 billion in assets, Vanguard SmallCap Growth ETF has $15.42 billion. IJT has an expense ratio of 0.18% and VBK charges 0.07%.

Bottom-Line

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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Zacks Investment Research