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

Looking for broad exposure to the Small Cap Blend segment of the US equity market? You should consider the Vanguard Russell 2000 ETF (VTWO), a passively managed exchange traded fund launched on 09/22/2010.

The fund is sponsored by Vanguard. It has amassed assets over $10.62 billion, making it one of the largest ETFs attempting to match the Small Cap Blend segment of the US equity market.

Why Small Cap Blend

There's a lot of potential to investing in small cap companies, but with market capitalization below $2 billion, that high potential comes with even higher risk.

Blend ETFs are aptly named, since they tend to hold a mix of growth and value stocks, as well as show characteristics of both kinds of equities.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.07%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.43%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Financials sector--about 19.40% of the portfolio. Industrials and Healthcare round out the top three.

Looking at individual holdings, Slbbh1142 accounts for about 1.73% of total assets, followed by Sprouts Farmers Market Inc (SFM) and Insmed Inc (INSM).

Performance and Risk

VTWO seeks to match the performance of the Russell 2000 Index before fees and expenses. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe.

The ETF has lost about -9.01% so far this year and is down about -3.38% in the last one year (as of 03/31/2025). In the past 52-week period, it has traded between $77.95 and $98.06.

The ETF has a beta of 1.18 and standard deviation of 22.35% for the trailing three-year period, making it a medium risk choice in the space. With about 1967 holdings, it effectively diversifies company-specific risk.

Alternatives

Vanguard Russell 2000 ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, VTWO is an excellent option for investors seeking exposure to the Style Box - Small Cap Blend segment of the market. There are other additional ETFs in the space that investors could consider as well.

The iShares Russell 2000 ETF (IWM) and the iShares Core S&P Small-Cap ETF (IJR) track a similar index. While iShares Russell 2000 ETF has $65.10 billion in assets, iShares Core S&P Small-Cap ETF has $77.84 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.

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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This article originally published on Zacks Investment Research (zacks.com).

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