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VUG vs. IWM: What’s The Difference?

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

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

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

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Summary

VUGIWM
NameVanguard Growth Index Fund ETF SharesiShares Russell 2000 ETF
CategoryLarge GrowthSmall Blend
IssuerVanguardiShares
AUM165.53B66.48B
Avg. Return17.58%13.52%
Div. Yield0.57%0.86%
Expense Ratio0.04%0.19%

The Vanguard Growth Index Fund ETF Shares (VUG) is a Large Growth fund that is issued by Vanguard. It currently has 165.53B total assets under management and has yielded an average annual return of 17.58% over the past 10 years. The fund has a dividend yield of 0.57% with an expense ratio of 0.04%.

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%.

VUG’s dividend yield is 0.29% lower than that of IWM (0.57% vs. 0.86%). Also, VUG yielded on average 4.06% more per year over the past decade (17.58% vs. 13.52%). The expense ratio of VUG is 0.15 percentage points lower than IWM’s (0.04% vs. 0.19%).

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Fund Composition

Industry Exposure

VUG vs. IWM - Industry Exposure

VUGIWM
Technology39.05%14.21%
Industrials5.13%14.78%
Energy0.32%3.74%
Communication Services16.49%3.79%
Utilities0.0%2.44%
Healthcare8.09%20.3%
Consumer Defensive2.41%3.65%
Real Estate2.46%8.59%
Financial Services6.75%13.76%
Consumer Cyclical17.78%10.99%
Basic Materials1.52%3.74%

The Vanguard Growth Index Fund ETF Shares (VUG) has the most exposure to the Technology sector at 39.05%. This is followed by Consumer Cyclical and Communication Services at 17.78% and 16.49% respectively. Energy (0.32%), Basic Materials (1.52%), and Consumer Defensive (2.41%) only make up 4.25% of the fund’s total assets.

VUG’s mid-section with moderate exposure is comprised of Real Estate, Industrials, Financial Services, Healthcare, and Communication Services stocks at 2.46%, 5.13%, 6.75%, 8.09%, and 16.49%.

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%.

VUG is 24.84% more exposed to the Technology sector than IWM (39.05% vs 14.21%). VUG’s exposure to Consumer Cyclical and Communication Services stocks is 6.79% higher and 12.70% higher respectively (17.78% vs. 10.99% and 16.49% vs. 3.79%). In total, Energy, Basic Materials, and Consumer Defensive also make up 6.88% less of the fund’s holdings compared to IWM (4.25% vs. 11.13%).

Holdings

VUG - Holdings

VUG HoldingsWeight
Apple Inc10.13%
Microsoft Corp9.52%
Amazon.com Inc6.88%
Facebook Inc Class A3.89%
Alphabet Inc Class A3.43%
Alphabet Inc Class C3.22%
Tesla Inc2.44%
NVIDIA Corp2.21%
Visa Inc Class A1.78%
PayPal Holdings Inc1.6%

VUG’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 10.13%, 9.52%, 6.88%, 3.89%, and 3.43%.

Alphabet Inc Class C (3.22%), Tesla Inc (2.44%), and NVIDIA Corp (2.21%) have a slightly smaller but still significant weight. Visa Inc Class A and PayPal Holdings Inc are also represented in the VUG’s holdings at 1.78% and 1.6%.

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%.

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Risk Analysis

VUGIWM
Mean Return1.441.12
R-squared92.4877.73
Std. Deviation14.7618.87
Alpha1.81-5.12
Beta1.041.23
Sharpe Ratio1.130.68
Treynor Ratio16.139.56

The Vanguard Growth Index Fund ETF Shares (VUG) has a Alpha of 1.81 with a R-squared of 92.48 and a Sharpe Ratio of 1.13. Its Beta is 1.04 while VUG’s Standard Deviation is 14.76. Furthermore, the fund has a Treynor Ratio of 16.13 and a Mean Return of 1.44.

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

VUG’s Mean Return is 0.32 points higher than that of IWM and its R-squared is 14.75 points higher. With a Standard Deviation of 14.76, VUG is slightly less volatile than IWM. The Alpha and Beta of VUG are 6.93 points higher and 0.19 points lower than IWM’s Alpha and Beta.

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Performance

Annual Returns

VUG vs. IWM - Annual Returns

YearVUGIWM
202040.16%19.89%
201937.26%25.42%
2018-3.32%-11.02%
201727.8%14.66%
20166.13%21.36%
20153.32%-4.33%
201413.62%4.94%
201332.38%38.85%
201217.03%16.39%
20111.87%-4.19%
201017.11%26.76%

VUG had its best year in 2020 with an annual return of 40.16%. VUG’s worst year over the past decade yielded -3.32% and occurred in 2018. In most years the Vanguard Growth Index Fund ETF Shares provided moderate returns such as in 2014, 2012, and 2010 where annual returns amounted to 13.62%, 17.03%, and 17.11% respectively.

The year 2013 was the strongest year for IWM, returning 38.85% on an annual basis. The poorest year for IWM in the last ten years was 2018, with a yield of -11.02%. Most years the iShares Russell 2000 ETF has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 14.66%, 16.39%, and 19.89% respectively.

Portfolio Growth

VUG vs. IWM - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VUG$10,000$54,73517.58%
IWM$10,000$36,68613.52%

A $10,000 investment in VUG would have resulted in a final balance of $54,735. This is a profit of $44,735 over 11 years and amounts to a compound annual growth rate (CAGR) of 17.58%.

With a $10,000 investment in IWM, the end total would have been $36,686. This equates to a $26,686 profit over 11 years and a compound annual growth rate (CAGR) of 13.52%.

VUG’s CAGR is 4.06 percentage points higher than that of IWM and as a result, would have yielded $18,049 more on a $10,000 investment. Thus, VUG outperformed IWM by 4.06% annually.


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