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

Designed to provide broad exposure to the Small Cap Growth segment of the US equity market, the Vanguard Russell 2000 Growth ETF (VTWG) is a passively managed exchange traded fund launched on 09/22/2010.

The fund is sponsored by Vanguard. It has amassed assets over $871.28 million, making it one of the average sized ETFs attempting to match the Small Cap Growth segment of the US equity market.

Why Small Cap Growth

With more potential comes more risk, and small cap companies, with market capitalization below $2 billion, epitomizes this way of thinking.

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. Additionally, growth stocks have a greater level of risk associated with them. When you consider growth versus value, growth stocks are usually the clear winner in strong bull markets but tend to fall flat in nearly all other 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 0.10%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 0.63%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Healthcare sector--about 24% of the portfolio. Industrials and Information Technology round out the top three.

Looking at individual holdings, Sprouts Farmers Market Inc (SFM) accounts for about 1.12% of total assets, followed by Insmed Inc (INSM) and Ftai Aviation Ltd (FTAI).

Performance and Risk

VTWG seeks to match the performance of the Russell 2000 Growth Index before fees and expenses. The Russell 2000 Growth Index measures the performance of those Russell 2000 companies with higher price/book ratios and higher predicted and historical growth rates.

The ETF has lost about -15.32% so far this year and is down about -7.30% in the last one year (as of 04/04/2025). In the past 52-week period, it has traded between $177.72 and $229.76.

The ETF has a beta of 1.17 and standard deviation of 24.05% for the trailing three-year period, making it a high risk choice in the space. With about 1126 holdings, it effectively diversifies company-specific risk.

Alternatives

Vanguard Russell 2000 Growth ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, VTWG is a reasonable option for those seeking exposure to the Style Box - Small Cap Growth area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell 2000 Growth ETF (IWO) and the Vanguard Small-Cap Growth ETF (VBK) track a similar index. While iShares Russell 2000 Growth ETF has $10.29 billion in assets, Vanguard Small-Cap Growth ETF has $16.81 billion. IWO has an expense ratio of 0.24% and VBK charges 0.07%.

Bottom-Line

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds 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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