There are a number of reasons an investor would want to own a Russell 2000 ETF. The Russell 2000 index tracks a broad range of small-cap stocks, so if you want exposure to hundreds of small-cap stocks, the easiest way is with a Russell 2000 ETF.
The underlying index tends to be more volatile than other stock market indexes, such as the S&P 500, which tracks large-cap stocks. So, a Russell 2000 ETF is more well suited to risk-tolerant investors. But with investors preparing for interest rates to come down, now could be an opportune moment to buy a Russell 2000 ETF since the index tends to do well when interest rates are falling.
In the article below, we'll discuss the key components of the best exchange-traded funds (ETFs) that track the benchmark Russell 2000, including their assets under management, expense ratios, investment results, unique aspects, and other attributes.
The top 5
Top 5 Russell 2000 ETFs
| Name | Issuer | Assets Under Management | Expense Ratio |
|---|---|---|---|
| iShares Russell 2000 ETF (NYSEMKT:IWM) | BlackRock | $69.6 billion | 0.19% |
| Vanguard Russell 2000 Index Fund (NASDAQ:VTWO) | Vanguard | $12.3 billion | 0.1% |
| Vanguard Russell 2000 Growth Index Fund (NASDAQ:VTWG) | Vanguard | $1.29 billion | 0.15% |
| Vanguard Russell 2000 Value Index (NASDAQ:VTWV) | Vanguard | $907.3 million | 0.15% |
| Direxion Daily Small Cap Bull 3x Shares (NYSEMKT:TNA) | Direxion | $2.55 billion | 1.08% |
1. iShares Russell 2000 ETF
The iShares Russell 2000 ETF is the largest Russell 2000 ETF by far, with more than $60 billion in assets under management and a reasonably low expense ratio of 0.19%. The index seeks to track the investment results of the Russell 2000 index.
No single stock makes up more than 0.6% of the total ETF. Its top five stock holdings are FTAI Aviation (NASDAQ:FTAI.PRA), Vaxcyte (PCVX 0.57%), Insmed (INSM -3.99%), Sprouts Farmers Market (SFM -2.03%), and Fabrinet (FN -1.01%), which have individual weights between 0.34% and 0.55% as of October 2024.
That group of stocks shows how the ETF offers diversification by including companies focused on healthcare, consumer goods, and industrials. The iShares Russell 2000 ETF offers a dividend yield of 1.23%. The stocks it holds are also cheaper than the market average since the fund trades at a price-to-earnings (P/E) ratio of just 16.
2. Vanguard Russell 2000 ETF
The Vanguard Russell 2000 ETF is the best option if you're looking for a low expense ratio. It charges only 0.1% of assets invested to participate in the fund. The ETF was started in 2010, and since then, its returns have mirrored those of the Russell 2000 index, up roughly 10% annually.
Its top holdings are similar to those of the iShares Russell 2000 ETF, and industrials are its biggest sector, accounting for 19% of its holdings. It also pays a slightly better dividend yield than the iShares Russell 2000 ETF, at 1.33%.
3. Vanguard Russell 2000 Growth ETF
Some ETFs are divided into value and growth funds to make it easier for investors to get exposure to one or the other, and Vanguard has done that here. The Vanguard Russell 2000 Growth ETF invests in stocks held by the Russell 2000 Growth index and is riskier and more volatile than the ETFs that track the Russell 2000.
It holds 1,131 stocks with a median market cap of $3.6 billion. Many of its top holdings are the same as the ETFs that track the broad Russell 2000. For instance, its five biggest holdings are Vaxcyte, FTAI Aviation, Insmed, Sprouts Farmers Market, and Fabrinet. Those five stocks comprise between 0.63% and 0.99% of the fund.
The biggest sector in the Vanguard Russell 2000 Growth ETF is healthcare. That sector makes up 25.5% of the total fund and has a P/E ratio of 24.1.
Exchange-Traded Fund (ETF)
4. Vanguard Russell 2000 Value ETF
As you might guess, the Vanguard Russell 2000 Value ETF is the counterpart to the growth ETF. Because it holds small-cap stocks, Vanguard describes it similarly to the Russell 2000 Growth ETF, saying the value ETF offers high potential for investment growth but has more market volatility than funds that hold bonds.
The Russell 2000 Value ETF holds 1,450 stocks. Its largest holdings present a different makeup from the growth ETF or Russell 2000 ETFs.
Its top five holdings are SouthState (NASDAQ:SSB), Meritage Homes (MTH 1.97%), Taylor Morrison Home (TMHC 1.33%), Lumen Technologies (LUMN 6.6%), and Jackson Financial (JXN -0.56%). Each holding makes up between 0.52% and 0.56% of the fund.
Financials are the biggest component of the Vanguard Russell 2000 Value ETF, making up 27.3% of the index. This makes sense, considering financials typically trade at low earnings multiples and aren't known for growth.
It also offers a yield of 2.15%, showing it has more exposure to dividend stocks than the other ETFs on this list. The ETF trades at a P/E ratio of 13.6, making it cheaper than the broad-based Russell 2000 ETF.
5. Direxion Daily Small Cap Bull 3x Shares
Another option for investing in Russell 2000 ETFs is to choose a leveraged ETF, such as the Direxion Daily Small Cap Bull 3x Shares. Leveraged ETFs use options and other tactics to magnify the movements of the underlying index fund.
That makes them riskier than typical ETFs and index funds but also offers the potential for outsize returns. Using those tools, the ETF seeks to provide a return that is 200% of the benchmark's return in a single day. The ETF's five largest holdings and their weightings are the same as those of the iShares Russell 2000 ETF.
If you're bullish on the recovery and want to own small caps, a leveraged ETF like the Direxion Daily Small Cap Bull 3x Shares is a good choice. However, leveraged ETFs aren't intended for long-term ownership as they decay over time. They are best used for short-term purposes.
Related investing topics
Should I invest?
Why you should consider a Russell 2000 ETF
Exchange-traded funds offer the convenience of an individual stock without the need to choose individual stocks. They give investors a degree of diversification that would be hard to get by only buying individual stocks.
If you want to own small-cap stocks, buying shares of a Russell 2000 ETF is a great way to do so. There are thousands of small caps to choose from, far more than any investor can be expected to follow on their own. As you can see from the list above, there are also a variety of choices if you prefer growth or value, for example, and many of the ETFs offer minimal expense ratios.
Investing in a Russell 2000 ETF offers exposure to a broad range of small-cap stocks, giving you the benefit of diversification and the ability to own a class of stocks likely to outperform in the bull market, especially as interest rates fall.
FAQ
Best Russell 2000 ETFs FAQ
What is the best ETF for the Russell 2000?
There are different ETF options depending on the types of stocks you're looking for, but the iShares Russell 2000 ETF is by far the largest Russell 2000 ETF.
What is the average return of the Russell 2000 ETF?
The Russell 2000 has had a 9.3% compound annual return since 2005.
Does Vanguard have a Russell 2000 ETF?
Yes, Vanguard has several Russell 2000 ETFs, including some focusing on growth and value stocks, such as the Vanguard Russell 2000 Growth Index Fund and Vanguard Russell 2000 Value Index. Its Vanguard Russell 2000 Index Fund ETF tracks the Russell 2000.
Is the Russell 2000 a good buy?
The Russell 2000 tends to be more volatile than the S&P 500, but its returns have been similar over a long period of time. The Russell 2000 tends to outperform in bull markets and when interest rates are falling.
