Designed to provide broad exposure to the Small Cap Blend segment of the US equity market, the Vanguard Russell 2000 Index Fund ETF Shares (VTWO) is a passively managed exchange traded fund launched on September 22, 2010.
The fund is sponsored by Vanguard. It has amassed assets over $17.50 billion, making it one of the largest ETFs attempting to match the Small Cap Blend segment of the US equity market.
Why Small Cap Blend
With more potential comes more risk, and small cap companies, with market capitalization below $2 billion, epitomizes this way of thinking.
Blend ETFs usually hold a mix of growth and value stocks as well as stocks that exhibit both value and growth characteristics.
Costs
When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.06%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 1.06%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Healthcare sector -- about 20.1% of the portfolio. Financials and Industrials round out the top three.
Looking at individual holdings, Slbbh1142 accounts for about 2.14% of total assets, followed by Moog Inc (MOG/A) and Hut 8 Corp (HUT).
Performance and Risk
VTWO seeks to match the performance of the Russell 2000 Index before fees and expenses. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe.
The ETF has gained about 24.1% so far this year and is up roughly 35.27% in the last one year (as of 08/18/2026). In the past 52-week period, it has traded between $91.18 and $123.31.
The ETF has a beta of 1.11 and standard deviation of 20.81% for the trailing three-year period, making it a medium risk choice in the space. With about 2015 holdings, it effectively diversifies company-specific risk.
Alternatives
Vanguard Russell 2000 Index Fund ETF Shares holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, VTWO is a great option for investors seeking exposure to the Style Box - Small Cap Blend segment of the market. There are other additional ETFs in the space that investors could consider as well.
The Vanguard Morningstar Small-Cap ETF (VB) and the iShares Core S&P Small-Cap ETF (IJR) track a similar index. While Vanguard Morningstar Small-Cap ETF has $83.26 billion in assets, iShares Core S&P Small-Cap ETF has $112.96 billion. VB has an expense ratio of 0.03% and IJR charges 0.06%.
Bottom-Line
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Vanguard Russell 2000 Index Fund ETF Shares (VTWO): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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