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

The Goldman Sachs Equal Weight U.S. Large Cap Equity ETF made its debut on 09/12/2017, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Large Cap Blend category of the market.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

Because the fund has amassed over $730.43 million, this makes it one of the larger ETFs in the Style Box - Large Cap Blend. GSEW is managed by Goldman Sachs Funds. Before fees and expenses, GSEW seeks to match the performance of the Solactive US Large Cap Equal Weight Index.

The Solactive US Large Cap Equal Weight Index is an equal-weight version of the Solactive US Large Cap Index including equity securities of approximately 500 of the largest U.S. companies.

Cost & Other Expenses

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.

Operating expenses on an annual basis are 0.09% for this ETF, which makes it one of the least expensive products in the space.

It's 12-month trailing dividend yield comes in at 1.58%.

Sector Exposure and Top Holdings

Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.

GSEW's heaviest allocation is in the Information Technology sector, which is about 16.60% of the portfolio. Its Industrials and Financials round out the top three.

Looking at individual holdings, Exxon Mobil Corp accounts for about 0.40% of total assets, followed by First Solar Inc and Microstrategy Inc .

The top 10 holdings account for about 2.89% of total assets under management.

Performance and Risk

Year-to-date, the Goldman Sachs Equal Weight U.S. Large Cap Equity ETF has gained about 8.43% so far, and it's up approximately 13.82% over the last 12 months (as of 07/25/2024). GSEW has traded between $56.58 and $74.38 in this past 52-week period.

The fund has a beta of 1.05 and standard deviation of 17.81% for the trailing three-year period. With about 495 holdings, it effectively diversifies company-specific risk.

Alternatives

Goldman Sachs Equal Weight U.S. Large Cap Equity ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Core S&P 500 ETF tracks S&P 500 Index and the SPDR S&P 500 ETF tracks S&P 500 Index. IShares Core S&P 500 ETF has $492.15 billion in assets, SPDR S&P 500 ETF has $556.10 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Blend.

Bottom Line

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

The fund is sponsored by Blackrock. It has amassed assets over $11.95 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

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

Growth stocks have higher than average sales and earnings growth rates. While these are expected to grow faster than the broader market, they also have higher valuations. Something to keep in mind is the higher level of volatility that is affiliated with growth stocks. They are likely to outperform value stocks in strong bull markets but over the longer-term, value stocks have delivered better returns than growth stocks in almost all markets.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

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 0.62%.

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 Information Technology sector--about 24.10% of the portfolio. Healthcare and Industrials round out the top three.

Looking at individual holdings, Super Micro Computer Inc- accounts for about 3.06% of total assets, followed by Microstrategy Inc Class A- and Comfort Systems Usa Inc- .

The top 10 holdings account for about 10.43% 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 added about 11.98% so far this year and is up about 13.68% in the last one year (as of 07/23/2024). In the past 52-week period, it has traded between $204.07 and $289.78.

The ETF has a beta of 1.15 and standard deviation of 24.84% for the trailing three-year period, making it a high risk choice in the space. With about 1064 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares 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, IWO 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 S&P Small-Cap 600 Growth ETF and the Vanguard Small-Cap Growth ETF track a similar index. While iShares S&P Small-Cap 600 Growth ETF has $6.34 billion in assets, Vanguard Small-Cap Growth ETF has $17.69 billion. IJT has an expense ratio of 0.18% and VBK charges 0.07%.

Bottom-Line

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

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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