The iShares Russell 2000 ETF (IWM) and the Vanguard Small-Cap Value Index Fund ETF Shares (VBR) are both among the Top 100 ETFs. IWM is a iShares Small Blend fund and VBR is a Vanguard Small Value fund. So, what’s the difference between IWM and VBR? And which fund is better?
The expense ratio of IWM is 0.12 percentage points higher than VBR’s (0.19% vs. 0.07%). IWM also has a higher exposure to the healthcare sector and a higher standard deviation. Overall, IWM has provided higher returns than VBR over the past ten years.
In this article, we’ll compare IWM vs. VBR. We’ll look at fund composition and annual returns, as well as at their portfolio growth and risk metrics. Moreover, I’ll also discuss IWM’s and VBR’s holdings, performance, and industry exposure and examine how these affect their overall returns.
|Name||iShares Russell 2000 ETF||Vanguard Small-Cap Value Index Fund ETF Shares|
|Category||Small Blend||Small Value|
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 Value Index Fund ETF Shares (VBR) is a Small Value fund that is issued by Vanguard. It currently has 48.08B total assets under management and has yielded an average annual return of 12.28% over the past 10 years. The fund has a dividend yield of 1.6% with an expense ratio of 0.07%.
IWM’s dividend yield is 0.74% lower than that of VBR (0.86% vs. 1.6%). Also, IWM yielded on average 1.24% more per year over the past decade (13.52% vs. 12.28%). The expense ratio of IWM is 0.12 percentage points higher than VBR’s (0.19% vs. 0.07%).
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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 Value Index Fund ETF Shares (VBR) has the most exposure to the Financial Services sector at 20.04%. This is followed by Industrials and Consumer Cyclical at 18.44% and 13.82% respectively. Utilities (3.65%), Consumer Defensive (4.36%), and Energy (5.15%) only make up 13.16% of the fund’s total assets.
VBR’s mid-section with moderate exposure is comprised of Basic Materials, Healthcare, Technology, Real Estate, and Consumer Cyclical stocks at 6.31%, 7.16%, 8.39%, 10.92%, and 13.82%.
IWM is 13.14% more exposed to the Healthcare sector than VBR (20.3% vs 7.16%). IWM’s exposure to Industrials and Technology stocks is 3.66% lower and 5.82% higher respectively (14.78% vs. 18.44% and 14.21% vs. 8.39%). In total, Consumer Defensive, Basic Materials, and Energy also make up 4.69% less of the fund’s holdings compared to VBR (11.13% vs. 15.82%).
|AMC Entertainment Holdings Inc Class A||0.52%|
|Intellia Therapeutics Inc||0.33%|
|BlackRock Cash Funds Treasury SL Agency||0.29%|
|Tenet Healthcare Corp||0.26%|
|Lattice Semiconductor Corp||0.26%|
|Tetra Tech Inc||0.25%|
|EastGroup Properties Inc||0.24%|
|Arrowhead Pharmaceuticals Inc||0.24%|
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%.
|Diamondback Energy Inc||0.55%|
|VICI Properties Inc Ordinary Shares||0.54%|
|Nuance Communications Inc||0.5%|
|Molina Healthcare Inc||0.48%|
|Howmet Aerospace Inc||0.44%|
|Apollo Global Management Inc Class A||0.42%|
|Brown & Brown Inc||0.41%|
VBR’s Top Holdings are Diamondback Energy Inc, VICI Properties Inc Ordinary Shares, IDEX Corp, Nuance Communications Inc, and Molina Healthcare Inc at 0.55%, 0.54%, 0.54%, 0.5%, and 0.48%.
Signature Bank (0.46%), Novavax Inc (0.44%), and Howmet Aerospace Inc (0.44%) have a slightly smaller but still significant weight. Apollo Global Management Inc Class A and Brown & Brown Inc are also represented in the VBR’s holdings at 0.42% and 0.41%.
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The iShares Russell 2000 ETF (IWM) has a Standard Deviation of 18.87 with a Beta of 1.23 and a R-squared of 77.73. Its Sharpe Ratio is 0.68 while IWM’s Mean Return is 1.12. Furthermore, the fund has a Alpha of -5.12 and a Treynor Ratio of 9.56.
The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) has a Beta of 1.23 with a R-squared of 82.2 and a Mean Return of 1.08. Its Sharpe Ratio is 0.67 while VBR’s Treynor Ratio is 9.15. Furthermore, the fund has a Standard Deviation of 18.37 and a Alpha of -5.09.
IWM’s Mean Return is 0.04 points higher than that of VBR and its R-squared is 4.47 points lower. With a Standard Deviation of 18.87, IWM is slightly more volatile than VBR. The Alpha and Beta of IWM are 0.03 points lower and 0.00 points lower than VBR’s Alpha and Beta.
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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 VBR, returning 36.57% on an annual basis. The poorest year for VBR in the last ten years was 2018, with a yield of -12.22%. Most years the Vanguard Small-Cap Value Index Fund ETF Shares has given investors modest returns, such as in 2014, 2017, and 2012, when gains were 10.55%, 11.79%, and 18.78% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 VBR, the end total would have been $32,611. This equates to a $22,611 profit over 11 years and a compound annual growth rate (CAGR) of 12.28%.
IWM’s CAGR is 1.24 percentage points higher than that of VBR and as a result, would have yielded $4,075 more on a $10,000 investment. Thus, IWM outperformed VBR by 1.24% annually.
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