VOO vs. IWM: 2 Iconic Indexes, 2 Very Different Slices of the U.S. Market

The Vanguard S&P 500 ETF (NYSEMKT:VOO) and the iShares Russell 2000 ETF (NYSEMKT:IWM) basal isolated connected cost, risk, and portfolio creation -- VOO tracks large-cap U.S. leaders with ultra-low fees, portion IWM offers small-cap vulnerability astatine higher cost, with greater volatility and a antithetic assemblage mix.

VOO and IWM some connection wide U.S. equity coverage, but they play successful antithetic arenas: VOO tracks the S&P 500’s blue-chip giants, portion IWM zeroes successful connected small-cap stocks via the Russell 2000 Index. This examination highlights however their costs, returns, hazard profiles, and assemblage exposures stack up for investors seeking maturation oregon diversification.

Beta measures terms volatility comparative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr instrumentality represents full instrumentality implicit the trailing 12 months.

IWM is little affordable than VOO, with an disbursal ratio implicit six times higher; VOO besides edges retired IWM successful dividend yield, offering a somewhat higher payout to investors.

IWM’s small-cap tilt means sharper terms swings: Its maximum drawdown implicit the past 5 years was notably deeper than VOO’s, and $1,000 invested successful IWM 5 years agone would person grown little than the aforesaid magnitude successful VOO.

IWM targets the small-cap conception of the U.S. equity market, holding 1,935 stocks with the largest weights successful healthcare, industrials, and fiscal services. As of its 25.9-year way record, its apical holdings—such arsenic Bloom Energy (NYSE:BE), Credo Technology Group(NASDAQ:CRDO), and Fabrinet (NYSE:FN)—each marque up little than 1.5% of the fund, resulting successful a highly diversified mix.

VOO, successful contrast, is concentrated successful large-cap names and heavy tilted toward technology, with its 3 largest holdings—Nvidia (NASDAQ:NVDA), Apple (NASDAQ:AAPL), and Microsoft (NASDAQ:MSFT)—together commanding astir 20% of the portfolio. This means VOO’s returns are much delicate to megacap tech performance, portion IWM offers broader vulnerability to smaller, little ascendant companies.

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VOO and IWM are some foundational ETFs, each serving arsenic the go-to benchmark for its respective country of the U.S. market. VOO tracks the S&P 500 — America's 500 largest companies — and present holds astir $1.4 trillion successful assets, making it the largest ETF successful the world. IWM tracks the Russell 2000, the astir wide followed small-cap index, with astir $72 cardinal successful assets and a 25-year way record.