How to Invest in iShares Russell 2000 ETF

What is the iShares Russell 2000 ETF?

The iShares Russell 2000 ETF is an ETF managed by BlackRock (BLK +1.19%) that tracks the approximately 2,000 small-cap stocks in the Russell 2000 index. The index comprises the 2,000 smallest stocks in the Russell 3000 index, which is an attempt to gauge the performance of the entire stock market. Overall, the Russell 2000 index represents just 7% of the market value of the Russell 3000.

The fund is passively managed, which means there's no one actively selecting investments. The goal is to replicate the performance of its benchmark index as closely as possible. Launched in 2000, the iShares Russell 2000 ETF is the second-largest small-cap ETF in the U.S., with almost $58 billion in assets under management.

Like its benchmark index, the iShares Russell 2000 ETF is market-cap-weighted, meaning a company's weighting in the index is based on its market capitalization (i.e., the total value of its outstanding shares).

How to invest in the iShares Russell 2000 ETF

It's pretty simple to invest in ETFs like the iShares Russell 2000 ETF, even if you don't have any investing experience. To get started, follow these steps:

1. Open your brokerage app: Log in to your brokerage account where you handle your investments.
2. Search for the stock: Enter the ticker (IWM) or fund name into the search bar to bring up the stock's trading page.
3. Decide how many shares to buy: Consider your investment goals and how much of your portfolio you want to allocate to this stock.
4. Select order type: Choose between a market order to buy at the current price or a limit order to specify the maximum price you're willing to pay.
5. Submit your order: Confirm the details and submit your buy order.
6. Review your purchase: Check your portfolio to ensure your order was filled as expected and adjust your investment strategy accordingly.

Should I invest in the iShares Russell 2000 ETF?

The iShares Russell 2000 ETF could be a good choice if you're seeking exposure to small-cap stocks. Small-cap stocks theoretically have higher potential returns than large-cap stocks because they have more room to grow.

In the past two decades, though, small-cap stocks in the Russell 2000 index have underperformed the S&P 500. The performance of small caps has been especially underwhelming recently as smaller companies have struggled with higher interest rates, while a few behemoth tech companies have accounted for much of the U.S. stock market's overall returns. Consider investing in the iShares Russell 2000 ETF if:

• You believe small-cap stocks are undervalued and have significant potential to grow.
• You already have a well-diversified mix of investments that includes large-cap and mid-cap stocks.
• You have at least a moderate risk tolerance and are comfortable with more volatility than you'd get with an S&P 500 index fund or a similar ETF that tracks large-cap stocks.

Does the iShares Russell 2000 ETF pay a dividend?

The iShares Russell 2000 ETF pays a quarterly dividend based on the dividend payouts of the stocks in the fund. As of mid-May 2025, its annual dividend yield was 1.40%. For comparison, the S&P 500 index's annual dividend yield is about 1.35%.

Small-cap stocks generally aren't a great source of dividend income because smaller companies often need to reinvest their profits instead of distributing them to shareholders. If you're seeking investment income, consider a dividend ETF instead.

What is the iShares Russell 2000 ETF expense ratio?

To choose the best ETFs to invest in, it's important to know the expense ratio, which is the percentage of your investment that goes toward fees. A high expense ratio can erode your investment returns over time.

Historical performance of the iShares Russell 2000 ETF

It's important to consider historical performance in selecting an ETF. Although future returns are never guaranteed, past performance provides valuable insight into a fund's volatility and can help guide your decision about the proper allocation. Here's a breakdown of the iShares Russell 2000 ETF's historical performance as of April 30, 2025.

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