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IWM vs. VBK: What’s The Difference?

The iShares Russell 2000 ETF (IWM) and the Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) are both among the Top 100 ETFs. IWM is a iShares Small Blend fund and VBK is a Vanguard Small Growth fund. So, what’s the difference between IWM and VBK? And which fund is better?

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The expense ratio of IWM is 0.12 percentage points higher than VBK’s (0.19% vs. 0.07%). IWM also has a lower exposure to the healthcare sector and a higher standard deviation. Overall, IWM has provided lower returns than VBK over the past ten years.

In this article, we’ll compare IWM vs. VBK. We’ll look at industry exposure and portfolio growth, as well as at their holdings and annual returns. Moreover, I’ll also discuss IWM’s and VBK’s performance, fund composition, and risk metrics and examine how these affect their overall returns.

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Summary

IWMVBK
NameiShares Russell 2000 ETFVanguard Small-Cap Growth Index Fund ETF Shares
CategorySmall BlendSmall Growth
IssueriSharesVanguard
AUM66.48B37.89B
Avg. Return13.52%16.53%
Div. Yield0.86%0.45%
Expense Ratio0.19%0.07%

The iShares Russell 2000 ETF (IWM) is a Small Blend fund that is issued by iShares. It currently has 66.48B total assets under management and has yielded an average annual return of 13.52% over the past 10 years. The fund has a dividend yield of 0.86% with an expense ratio of 0.19%.

The Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) is a Small Growth fund that is issued by Vanguard. It currently has 37.89B total assets under management and has yielded an average annual return of 16.53% over the past 10 years. The fund has a dividend yield of 0.45% with an expense ratio of 0.07%.

IWM’s dividend yield is 0.41% higher than that of VBK (0.86% vs. 0.45%). Also, IWM yielded on average 3.01% less per year over the past decade (13.52% vs. 16.53%). The expense ratio of IWM is 0.12 percentage points higher than VBK’s (0.19% vs. 0.07%).

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Fund Composition

Industry Exposure

IWM vs. VBK - Industry Exposure

IWMVBK
Technology14.21%27.87%
Industrials14.78%13.19%
Energy3.74%1.77%
Communication Services3.79%3.24%
Utilities2.44%0.32%
Healthcare20.3%23.24%
Consumer Defensive3.65%3.83%
Real Estate8.59%7.87%
Financial Services13.76%4.05%
Consumer Cyclical10.99%12.13%
Basic Materials3.74%2.49%

The iShares Russell 2000 ETF (IWM) has the most exposure to the Healthcare sector at 20.3%. This is followed by Industrials and Technology at 14.78% and 14.21% respectively. Consumer Defensive (3.65%), Basic Materials (3.74%), and Energy (3.74%) only make up 11.13% of the fund’s total assets.

IWM’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Consumer Cyclical, Financial Services, and Technology stocks at 3.79%, 8.59%, 10.99%, 13.76%, and 14.21%.

The Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) has the most exposure to the Technology sector at 27.87%. This is followed by Healthcare and Industrials at 23.24% and 13.19% respectively. Energy (1.77%), Basic Materials (2.49%), and Communication Services (3.24%) only make up 7.50% of the fund’s total assets.

VBK’s mid-section with moderate exposure is comprised of Consumer Defensive, Financial Services, Real Estate, Consumer Cyclical, and Industrials stocks at 3.83%, 4.05%, 7.87%, 12.13%, and 13.19%.

IWM is 2.94% less exposed to the Healthcare sector than VBK (20.3% vs 23.24%). IWM’s exposure to Industrials and Technology stocks is 1.59% higher and 13.66% lower respectively (14.78% vs. 13.19% and 14.21% vs. 27.87%). In total, Consumer Defensive, Basic Materials, and Energy also make up 3.04% more of the fund’s holdings compared to VBK (11.13% vs. 8.09%).

Holdings

IWM - Holdings

IWM HoldingsWeight
AMC Entertainment Holdings Inc Class A0.52%
Intellia Therapeutics Inc0.33%
Crocs Inc0.3%
BlackRock Cash Funds Treasury SL Agency0.29%
Tenet Healthcare Corp0.26%
Lattice Semiconductor Corp0.26%
Tetra Tech Inc0.25%
II-VI Inc0.25%
EastGroup Properties Inc0.24%
Arrowhead Pharmaceuticals Inc0.24%

IWM’s Top Holdings are AMC Entertainment Holdings Inc Class A, Intellia Therapeutics Inc, Crocs Inc, BlackRock Cash Funds Treasury SL Agency, and Tenet Healthcare Corp at 0.52%, 0.33%, 0.3%, 0.29%, and 0.26%.

Lattice Semiconductor Corp (0.26%), Tetra Tech Inc (0.25%), and II-VI Inc (0.25%) have a slightly smaller but still significant weight. EastGroup Properties Inc and Arrowhead Pharmaceuticals Inc are also represented in the IWM’s holdings at 0.24% and 0.24%.

VBK - Holdings

VBK HoldingsWeight
Charles River Laboratories International Inc0.78%
Pool Corp0.73%
Bio-Techne Corp0.73%
Avantor Inc0.73%
PerkinElmer Inc0.72%
Entegris Inc0.7%
PTC Inc0.62%
Fair Isaac Corp0.57%
Bill.com Holdings Inc Ordinary Shares0.56%
Avalara Inc0.55%

VBK’s Top Holdings are Charles River Laboratories International Inc, Pool Corp, Bio-Techne Corp, Avantor Inc, and PerkinElmer Inc at 0.78%, 0.73%, 0.73%, 0.73%, and 0.72%.

Entegris Inc (0.7%), PTC Inc (0.62%), and Fair Isaac Corp (0.57%) have a slightly smaller but still significant weight. Bill.com Holdings Inc Ordinary Shares and Avalara Inc are also represented in the VBK’s holdings at 0.56% and 0.55%.

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Risk Analysis

IWMVBK
Mean Return1.121.22
R-squared77.7380.56
Std. Deviation18.8717.95
Alpha-5.12-2.81
Beta1.231.18
Sharpe Ratio0.680.78
Treynor Ratio9.5611.18

The iShares Russell 2000 ETF (IWM) has a Standard Deviation of 18.87 with a Beta of 1.23 and a Mean Return of 1.12. Its R-squared is 77.73 while IWM’s Sharpe Ratio is 0.68. Furthermore, the fund has a Treynor Ratio of 9.56 and a Alpha of -5.12.

The Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) has a Beta of 1.18 with a R-squared of 80.56 and a Standard Deviation of 17.95. Its Alpha is -2.81 while VBK’s Sharpe Ratio is 0.78. Furthermore, the fund has a Treynor Ratio of 11.18 and a Mean Return of 1.22.

IWM’s Mean Return is 0.10 points lower than that of VBK and its R-squared is 2.83 points lower. With a Standard Deviation of 18.87, IWM is slightly more volatile than VBK. The Alpha and Beta of IWM are 2.31 points lower and 0.05 points higher than VBK’s Alpha and Beta.

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Performance

Annual Returns

IWM vs. VBK - Annual Returns

YearIWMVBK
202019.89%35.29%
201925.42%32.75%
2018-11.02%-5.68%
201714.66%21.9%
201621.36%10.74%
2015-4.33%-2.51%
20144.94%4.02%
201338.85%38.18%
201216.39%17.67%
2011-4.19%-1.43%
201026.76%30.87%

IWM had its best year in 2013 with an annual return of 38.85%. IWM’s worst year over the past decade yielded -11.02% and occurred in 2018. In most years the iShares Russell 2000 ETF provided moderate returns such as in 2017, 2012, and 2020 where annual returns amounted to 14.66%, 16.39%, and 19.89% respectively.

The year 2013 was the strongest year for VBK, returning 38.18% on an annual basis. The poorest year for VBK in the last ten years was 2018, with a yield of -5.68%. Most years the Vanguard Small-Cap Growth Index Fund ETF Shares has given investors modest returns, such as in 2016, 2012, and 2017, when gains were 10.74%, 17.67%, and 21.9% respectively.

Portfolio Growth

IWM vs. VBK - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
IWM$10,000$36,68613.52%
VBK$10,000$48,63916.53%

A $10,000 investment in IWM would have resulted in a final balance of $36,686. This is a profit of $26,686 over 11 years and amounts to a compound annual growth rate (CAGR) of 13.52%.

With a $10,000 investment in VBK, the end total would have been $48,639. This equates to a $38,639 profit over 11 years and a compound annual growth rate (CAGR) of 16.53%.

IWM’s CAGR is 3.01 percentage points lower than that of VBK and as a result, would have yielded $11,953 less on a $10,000 investment. Thus, IWM performed worse than VBK by 3.01% annually.


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