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Should iShares Russell 2000 ETF (IWM) Be on Your Investing Radar?

The iShares Russell 2000 ETF (IWM) was launched on 05/22/2000, and is a passively managed exchange traded fund designed to offer broad exposure to the Small Cap Blend segment of the US equity market.

The fund is sponsored by Blackrock. It has amassed assets over $56.56 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

There's a lot of potential to investing in small cap companies, but with market capitalization below $2 billion, that high potential comes with even higher risk.

Blend ETFs usually hold a mix of growth and value stocks as well as stocks that exhibit both value and growth characteristics.

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 1.29%.

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 Financials sector--about 18.40% of the portfolio. Healthcare and Industrials round out the top three.

Looking at individual holdings, Shockwave Medical Inc (SWAV) accounts for about 0.40% of total assets, followed by Biohaven Pharmaceutical Holding Co (BHVN) and Karuna Therapeutics Inc (KRTX).

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 -16.06% so far this year and is down about -13.01% in the last one year (as of 12/01/2022). In the past 52-week period, it has traded between $163.90 and $225.63.

The ETF has a beta of 1.15 and standard deviation of 30.94% for the trailing three-year period, making it a medium risk choice in the space. With about 1980 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares Russell 2000 ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, IWM is a good option for those seeking exposure to the Style Box - Small Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.

The Vanguard SmallCap ETF (VB) and the iShares Core S&P SmallCap ETF (IJR) track a similar index. While Vanguard SmallCap ETF has $43.30 billion in assets, iShares Core S&P SmallCap ETF has $69.55 billion. VB has an expense ratio of 0.05% and IJR charges 0.06%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are 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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

iShares Russell 2000 ETF (IWM): ETF Research Reports

iShares Core S&P SmallCap ETF (IJR): ETF Research Reports

Vanguard SmallCap ETF (VB): ETF Research Reports

Biohaven Ltd. (BHVN) : Free Stock Analysis Report

ShockWave Medical, Inc. (SWAV) : Free Stock Analysis Report

Karuna Therapeutics, Inc. (KRTX) : Free Stock Analysis Report

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Zacks Investment Research