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

If you're seeking to diversify your investment portfolio with exposure to the Small Cap Growth section of the US equity market, consider the Vanguard Russell 2000 Growth ETF (VTWG). Launched on September 22, 2010, this passively managed exchange-traded fund (ETF) is backed by Vanguard.

The Vanguard Russell 2000 Growth ETF has accumulated over $1.05 billion in assets, positioning it among the average-sized ETFs that aim to reflect the Small Cap Growth segment of the US market.

Why Small Cap Growth?

Small cap companies, typically with market capitalizations below $2 billion, are known for their potential for substantial growth. They are often more volatile than larger companies, meaning they can be riskier investments, but they also present opportunities for higher returns.

Growth stocks are characterized by their faster growth rates, higher valuations, and above-average earnings growth. Although these stocks tend to perform well during bull markets, they may struggle in less favorable market conditions compared to value stocks.

Costs of Investing

When selecting an ETF, cost is a crucial factor. Funds with lower expense ratios can outperform more expensive funds, assuming other fundamentals are similar.

The Vanguard Russell 2000 Growth ETF comes with an attractive annual operating expense ratio of just 0.15%, making it one of the more affordable options in its category. It also boasts a 12-month trailing dividend yield of 0.54%.

Sector Allocations and Top Holdings

Investing in ETFs can help mitigate single-stock risks due to their diversified nature. However, it's wise to examine the underlying holdings of an ETF before committing funds. Most ETFs, including VTWG, are transparent about their holdings.

This ETF has a significant allocation to the Healthcare sector, which comprises 23.80% of its portfolio. Other notable sectors include Industrials and Information Technology.

Among its holdings, Ftai Aviation Ltd (FTAI) represents about 1.14% of total assets, followed by Slbbh1142 and Sprouts Farmers Market Inc (SFM).

Examining Performance and Risk

VTWG aims to replicate the performance of the Russell 2000 Growth Index while considering fees and expenses. This index tracks the performance of Russell 2000 companies that exhibit higher price-to-book ratios and superior growth rates.

As of January 30, 2025, VTWG has returned approximately 3.04% year-to-date and has experienced a growth of around 18.76% over the past year. Within the last 52 weeks, the ETF has fluctuated between $177.52 and $229.76.

With a beta of 1.17 and a standard deviation of 24.52% over the trailing three-year period, VTWG is considered a high-risk investment. Its diverse portfolio of about 1,126 holdings effectively helps reduce the risk associated with individual companies.

Potential Alternatives

The Vanguard Russell 2000 Growth ETF holds a Zacks ETF Rank of 3, classified as a 'Hold.' This ranking is influenced by several factors, including anticipated asset class returns, expense ratios, and momentum. Therefore, VTWG can be a suitable choice for investors looking for options within the Small Cap Growth area.

Investors may also want to explore alternative ETFs such as the iShares Russell 2000 Growth ETF (IWO) or the Vanguard Small-Cap Growth ETF (VBK). The iShares Russell 2000 Growth ETF manages $12.84 billion in assets, whereas the Vanguard Small-Cap Growth ETF has about $20.29 billion. While IWO has an expense ratio of 0.24%, VBK offers a more competitive rate of 0.07%.

Conclusion

The Vanguard Russell 2000 Growth ETF is an attractive long-term investment vehicle, well-regarded among both institutional and retail investors due to its low cost structure, transparency, flexibility, and tax efficiency.

For further details on VTWG and other ETFs tailored to your investment goals, consider seeking resources that provide insights into the latest trends and products in the ETF market.

ETF, Investing, Growth