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IWM vs. VLUE: What’s The Difference?

The iShares Russell 2000 ETF (IWM) and the iShares MSCI USA Value Factor ETF (VLUE) are both among the Top 100 ETFs. IWM is a iShares Small Blend fund and VLUE is a iShares Large Value fund. So, what’s the difference between IWM and VLUE? And which fund is better?

The expense ratio of IWM is 0.04 percentage points higher than VLUE’s (0.19% vs. 0.15%). IWM also has a higher exposure to the healthcare sector and a higher standard deviation. Overall, IWM has provided higher returns than VLUE over the past ten years.

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

Introduction To Mutual Funds
Introduction To Mutual Funds
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Summary

IWMVLUE
NameiShares Russell 2000 ETFiShares MSCI USA Value Factor ETF
CategorySmall BlendLarge Value
IssueriSharesiShares
AUM66.48B15.95B
Avg. Return13.52%8.91%
Div. Yield0.86%1.89%
Expense Ratio0.19%0.15%

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 iShares MSCI USA Value Factor ETF (VLUE) is a Large Value fund that is issued by iShares. It currently has 15.95B total assets under management and has yielded an average annual return of 8.91% over the past 10 years. The fund has a dividend yield of 1.89% with an expense ratio of 0.15%.

IWM’s dividend yield is 1.03% lower than that of VLUE (0.86% vs. 1.89%). Also, IWM yielded on average 4.61% more per year over the past decade (13.52% vs. 8.91%). The expense ratio of IWM is 0.04 percentage points higher than VLUE’s (0.19% vs. 0.15%).

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Fund Composition

Industry Exposure

IWM vs. VLUE - Industry Exposure

IWMVLUE
Technology14.21%26.89%
Industrials14.78%9.14%
Energy3.74%2.42%
Communication Services3.79%10.39%
Utilities2.44%2.68%
Healthcare20.3%14.31%
Consumer Defensive3.65%7.22%
Real Estate8.59%3.19%
Financial Services13.76%10.96%
Consumer Cyclical10.99%10.66%
Basic Materials3.74%2.14%

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 iShares MSCI USA Value Factor ETF (VLUE) has the most exposure to the Technology sector at 26.89%. This is followed by Healthcare and Financial Services at 14.31% and 10.96% respectively. Energy (2.42%), Utilities (2.68%), and Real Estate (3.19%) only make up 8.29% of the fund’s total assets.

VLUE’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Financial Services stocks at 7.22%, 9.14%, 10.39%, 10.66%, and 10.96%.

IWM is 5.99% more exposed to the Healthcare sector than VLUE (20.3% vs 14.31%). IWM’s exposure to Industrials and Technology stocks is 5.64% higher and 12.68% lower respectively (14.78% vs. 9.14% and 14.21% vs. 26.89%). In total, Consumer Defensive, Basic Materials, and Energy also make up 0.65% less of the fund’s holdings compared to VLUE (11.13% vs. 11.78%).

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%.

VLUE - Holdings

VLUE HoldingsWeight
AT&T Inc7.13%
Intel Corp6.14%
General Motors Co3.19%
Micron Technology Inc3.14%
Cisco Systems Inc3.05%
International Business Machines Corp2.76%
Target Corp2.38%
Citigroup Inc2.32%
Ford Motor Co2.23%
Pfizer Inc2.17%

VLUE’s Top Holdings are AT&T Inc, Intel Corp, General Motors Co, Micron Technology Inc, and Cisco Systems Inc at 7.13%, 6.14%, 3.19%, 3.14%, and 3.05%.

International Business Machines Corp (2.76%), Target Corp (2.38%), and Citigroup Inc (2.32%) have a slightly smaller but still significant weight. Ford Motor Co and Pfizer Inc are also represented in the VLUE’s holdings at 2.23% and 2.17%.

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Risk Analysis

IWMVLUE
Mean Return1.120
R-squared77.730
Std. Deviation18.870
Alpha-5.120
Beta1.230
Sharpe Ratio0.680
Treynor Ratio9.560

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

The iShares MSCI USA Value Factor ETF (VLUE) has a R-squared of 0 with a Sharpe Ratio of 0 and a Beta of 0. Its Standard Deviation is 0 while VLUE’s Mean Return is 0. Furthermore, the fund has a Alpha of 0 and a Treynor Ratio of 0.

IWM’s Mean Return is 1.12 points higher than that of VLUE and its R-squared is 77.73 points higher. With a Standard Deviation of 18.87, IWM is slightly more volatile than VLUE. The Alpha and Beta of IWM are 5.12 points lower and 1.23 points higher than VLUE’s Alpha and Beta.

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Performance

Annual Returns

IWM vs. VLUE - Annual Returns

YearIWMVLUE
202019.89%-0.32%
201925.42%27.47%
2018-11.02%-11.18%
201714.66%21.97%
201621.36%15.68%
2015-4.33%-3.54%
20144.94%12.29%
201338.85%0.0%
201216.39%0.0%
2011-4.19%0.0%
201026.76%0.0%

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 VLUE, returning 27.47% on an annual basis. The poorest year for VLUE in the last ten years was 2018, with a yield of -11.18%. Most years the iShares MSCI USA Value Factor ETF has given investors modest returns, such as in 2012, 2011, and 2010, when gains were 0.0%, 0.0%, and 0.0% respectively.

Portfolio Growth

IWM vs. VLUE - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
IWM$10,000$18,69113.52%
VLUE$10,000$17,2478.91%

A $10,000 investment in IWM would have resulted in a final balance of $18,691. This is a profit of $8,691 over 7 years and amounts to a compound annual growth rate (CAGR) of 13.52%.

With a $10,000 investment in VLUE, the end total would have been $17,247. This equates to a $7,247 profit over 7 years and a compound annual growth rate (CAGR) of 8.91%.

IWM’s CAGR is 4.61 percentage points higher than that of VLUE and as a result, would have yielded $1,444 more on a $10,000 investment. Thus, IWM outperformed VLUE by 4.61% annually.


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