Should iShares Russell 2000 ETF (IWM) Be on Your Investing Radar?
Launched on 05/22/2000, the iShares Russell 2000 ETF (IWM) is a passively managed exchange traded fund designed to provide a broad exposure to the Small Cap Blend segment of the US equity market.
The fund is sponsored by Blackrock. It has amassed assets over $58.13 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
Sitting at a market capitalization below $2 billion, small cap companies tend to be high-potential stocks compared to its large and mid cap counterparts, but come with higher risk.
Typically holding a combination of both growth and value stocks, blend ETFs also demonstrate qualities seen in value and growth investments.
Costs
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.19%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.32%.
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 Industrials sector--about 17.50% of the portfolio. Financials and Healthcare round out the top three.
Looking at individual holdings, Super Micro Computer Inc (SMCI) accounts for about 1.68% of total assets, followed by Microstrategy Inc Class A (MSTR) and Comfort Systems Usa Inc (FIX).
The top 10 holdings account for about 5.39% of total assets under management.
Performance and Risk
IWM seeks to match the performance of the Russell 2000 Index before fees and expenses. The Russell 2000 Index measures the performance of the small capitalization sector of the U.S. equity market.
The ETF has lost about -1.93% so far this year and it's up approximately 13.46% in the last one year (as of 05/02/2024). In the past 52-week period, it has traded between $162.21 and $210.30.
The ETF has a beta of 1.15 and standard deviation of 22.89% for the trailing three-year period, making it a medium risk choice in the space. With about 1963 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares Russell 2000 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, IWM is an outstanding 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 Vanguard Small-Cap ETF (VB) and the iShares Core S&P Small-Cap ETF (IJR) track a similar index. While Vanguard Small-Cap ETF has $52.96 billion in assets, iShares Core S&P Small-Cap ETF has $75.99 billion. VB has an expense ratio of 0.05% and IJR charges 0.06%.
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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iShares Russell 2000 ETF (IWM): ETF Research Reports
Super Micro Computer, Inc. (SMCI) : Free Stock Analysis Report
Comfort Systems USA, Inc. (FIX) : Free Stock Analysis Report
MicroStrategy Incorporated (MSTR) : Free Stock Analysis Report
iShares Core S&P Small-Cap ETF (IJR): ETF Research Reports
Vanguard Small-Cap ETF (VB): ETF Research Reports