VOO Has Delivered Higher Returns, But IWM Provides Broad Small Cap Exposure

Vanguard S&P 500 ETF (NYSEMKT:VOO) and iShares Russell 2000 ETF (NYSEMKT:IWM) people antithetic segments of the U.S. banal market, with VOO tracking large-cap leaders astatine a overmuch little disbursal ratio, portion IWM delivers small-cap vulnerability with higher volatility and a wider assemblage spread.

Both the Vanguard S&P 500 ETF (VOO) and iShares Russell 2000 ETF (IWM) are among the astir fashionable U.S. equity ETFs, but their approaches diverge. VOO concentrates connected the 500 largest U.S. companies, aiming to reflector the S&P 500, portion IWM offers entree to astir 2,000 small-cap stocks via the Russell 2000. This examination explores costs, returns, risk, and portfolio tilt to assistance clarify which whitethorn entreaty for antithetic objectives.

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

VOO is importantly much affordable to own, charging 0.03% annually compared to IWM’s 0.19%. Both funds connection akin dividend yields conscionable implicit 1%, truthful the outgo spread could substance much for semipermanent compounding than for income-focused investors.

IWM provides wide vulnerability to astir 1,945 small-cap U.S. stocks, with its largest assemblage weights successful healthcare (19%), fiscal services (16%), and exertion (16%). Top holdings are highly diversified, with Bloom Energy Class A Corp (NYSE:BE), Nextpower Inc Class A (NASDAQ:NXT), and Kratos Defense And Security Solutions (NASDAQ:KTOS) each representing little than 1.2% of assets. The fund’s agelong way grounds of 25.7 years and heavy roster springiness it a unsocial lens connected the small-cap space, though returns tin beryllium much volatile.

By contrast, VOO is built astir the S&P 500, heavy tilted to exertion (43%) and anchored by mega-cap companies specified arsenic NVIDIA Corp (NASDAQ:NVDA), Apple Inc (NASDAQ:AAPL), and Microsoft Corp (NASDAQ:MSFT). Its 505 holdings are much concentrated, with the apical 3 positions unsocial accounting for implicit 20% of assets. This creation makes VOO much delicate to moves successful the tech assemblage and large-cap trends.

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Both Vanguard S&P 500 ETF (VOO) and iShares Russell 2000 ETF (IWM) are compelling options for investors looking for an speech traded money (ETF) with wide vulnerability to the banal market. However, these 2 funds person immoderate important differences that investors request to understand. Here’s what they are.