The iShares Russell 2000 ETF (IWM) and the Vanguard Information Technology Index Fund ETF Shares (VGT) are both among the Top 100 ETFs. IWM is a iShares Small Blend fund and VGT is a Vanguard Technology fund. So, what’s the difference between IWM and VGT? And which fund is better?
The expense ratio of IWM is 0.09 percentage points higher than VGT’s (0.19% vs. 0.1%). IWM also has a higher exposure to the healthcare sector and a higher standard deviation. Overall, IWM has provided lower returns than VGT over the past ten years.
In this article, we’ll compare IWM vs. VGT. We’ll look at portfolio growth and fund composition, as well as at their performance and risk metrics. Moreover, I’ll also discuss IWM’s and VGT’s holdings, industry exposure, and annual returns and examine how these affect their overall returns.
Summary
| IWM | VGT | |
| Name | iShares Russell 2000 ETF | Vanguard Information Technology Index Fund ETF Shares |
| Category | Small Blend | Technology |
| Issuer | iShares | Vanguard |
| AUM | 66.48B | 54.13B |
| Avg. Return | 13.52% | 20.84% |
| Div. Yield | 0.86% | 0.66% |
| Expense Ratio | 0.19% | 0.1% |
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 Information Technology Index Fund ETF Shares (VGT) is a Technology fund that is issued by Vanguard. It currently has 54.13B total assets under management and has yielded an average annual return of 20.84% over the past 10 years. The fund has a dividend yield of 0.66% with an expense ratio of 0.1%.
IWM’s dividend yield is 0.20% higher than that of VGT (0.86% vs. 0.66%). Also, IWM yielded on average 7.31% less per year over the past decade (13.52% vs. 20.84%). The expense ratio of IWM is 0.09 percentage points higher than VGT’s (0.19% vs. 0.1%).
Fund Composition
Industry Exposure
| IWM | VGT | |
| Technology | 14.21% | 88.89% |
| Industrials | 14.78% | 1.67% |
| Energy | 3.74% | 0.0% |
| Communication Services | 3.79% | 0.61% |
| Utilities | 2.44% | 0.0% |
| Healthcare | 20.3% | 0.0% |
| Consumer Defensive | 3.65% | 0.0% |
| Real Estate | 8.59% | 0.0% |
| Financial Services | 13.76% | 8.83% |
| Consumer Cyclical | 10.99% | 0.0% |
| Basic Materials | 3.74% | 0.0% |
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 Information Technology Index Fund ETF Shares (VGT) has the most exposure to the Technology sector at 88.89%. This is followed by Financial Services and Industrials at 8.83% and 1.67% respectively. Consumer Cyclical (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.
VGT’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Energy, Communication Services, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.61%, and 1.67%.
IWM is 20.30% more exposed to the Healthcare sector than VGT (20.3% vs 0.0%). IWM’s exposure to Industrials and Technology stocks is 13.11% higher and 74.68% lower respectively (14.78% vs. 1.67% and 14.21% vs. 88.89%). In total, Consumer Defensive, Basic Materials, and Energy also make up 11.13% more of the fund’s holdings compared to VGT (11.13% vs. 0.00%).
Holdings
| IWM Holdings | Weight |
| AMC Entertainment Holdings Inc Class A | 0.52% |
| Intellia Therapeutics Inc | 0.33% |
| Crocs Inc | 0.3% |
| BlackRock Cash Funds Treasury SL Agency | 0.29% |
| Tenet Healthcare Corp | 0.26% |
| Lattice Semiconductor Corp | 0.26% |
| Tetra Tech Inc | 0.25% |
| II-VI 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%.
| VGT Holdings | Weight |
| Apple Inc | 19.58% |
| Microsoft Corp | 16.53% |
| NVIDIA Corp | 4.22% |
| Visa Inc Class A | 3.16% |
| PayPal Holdings Inc | 2.76% |
| Mastercard Inc Class A | 2.76% |
| Adobe Inc | 2.39% |
| Intel Corp | 1.94% |
| Salesforce.com Inc | 1.91% |
| Cisco Systems Inc | 1.9% |
VGT’s Top Holdings are Apple Inc, Microsoft Corp, NVIDIA Corp, Visa Inc Class A, and PayPal Holdings Inc at 19.58%, 16.53%, 4.22%, 3.16%, and 2.76%.
Mastercard Inc Class A (2.76%), Adobe Inc (2.39%), and Intel Corp (1.94%) have a slightly smaller but still significant weight. Salesforce.com Inc and Cisco Systems Inc are also represented in the VGT’s holdings at 1.91% and 1.9%.
Risk Analysis
| IWM | VGT | |
| Mean Return | 1.12 | 1.76 |
| R-squared | 77.73 | 74.84 |
| Std. Deviation | 18.87 | 16.61 |
| Alpha | -5.12 | 10.41 |
| Beta | 1.23 | 1.02 |
| Sharpe Ratio | 0.68 | 1.23 |
| Treynor Ratio | 9.56 | 20.55 |
The iShares Russell 2000 ETF (IWM) has a Mean Return of 1.12 with a Beta of 1.23 and a R-squared of 77.73. Its Treynor Ratio is 9.56 while IWM’s Sharpe Ratio is 0.68. Furthermore, the fund has a Standard Deviation of 18.87 and a Alpha of -5.12.
The Vanguard Information Technology Index Fund ETF Shares (VGT) has a Standard Deviation of 16.61 with a Treynor Ratio of 20.55 and a Alpha of 10.41. Its R-squared is 74.84 while VGT’s Sharpe Ratio is 1.23. Furthermore, the fund has a Mean Return of 1.76 and a Beta of 1.02.
IWM’s Mean Return is 0.64 points lower than that of VGT and its R-squared is 2.89 points higher. With a Standard Deviation of 18.87, IWM is slightly more volatile than VGT. The Alpha and Beta of IWM are 15.53 points lower and 0.21 points higher than VGT’s Alpha and Beta.
Performance
Annual Returns
| Year | IWM | VGT |
| 2020 | 19.89% | 45.94% |
| 2019 | 25.42% | 48.68% |
| 2018 | -11.02% | 2.52% |
| 2017 | 14.66% | 37.07% |
| 2016 | 21.36% | 13.73% |
| 2015 | -4.33% | 5.02% |
| 2014 | 4.94% | 18.01% |
| 2013 | 38.85% | 30.91% |
| 2012 | 16.39% | 14.05% |
| 2011 | -4.19% | 0.52% |
| 2010 | 26.76% | 12.74% |
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 2019 was the strongest year for VGT, returning 48.68% on an annual basis. The poorest year for VGT in the last ten years was 2011, with a yield of 0.52%. Most years the Vanguard Information Technology Index Fund ETF Shares has given investors modest returns, such as in 2016, 2012, and 2014, when gains were 13.73%, 14.05%, and 18.01% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| IWM | $10,000 | $36,686 | 13.52% |
| VGT | $10,000 | $72,718 | 20.84% |
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 VGT, the end total would have been $72,718. This equates to a $62,718 profit over 11 years and a compound annual growth rate (CAGR) of 20.84%.
IWM’s CAGR is 7.31 percentage points lower than that of VGT and as a result, would have yielded $36,032 less on a $10,000 investment. Thus, IWM performed worse than VGT by 7.31% annually.
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