Many exchange-traded funds (ETFs) offer a special focus. One way such funds accomplish this goal is by investing in stocks on a market-capitalization basis. The iShares Russell 2000 ETF (IWM), which exclusively holds small-cap positions, uses this method.
IWN models its portfolio after the Russell 2000 Index, a widely used market measure that tracks 2,000 U.S. companies. This focus means that IWM can be a useful diversification tool, since investors who choose to buy this fund will have their capital spread across 2,000 companies. In addition, small-cap stocks have turned in a strong performance historically, especially in good economies, which may give IWM further appeal if you expect economic improvement.
Last year, this fund gained 3.69%, but it already is up an additional 3.03% since the New Year began. The fund rose from a low point in October to jump more than 15%, as the following chart shows.
In addition, IWM’s $29.7 billion in assets make it the eighth-largest ETF. Its 1.31% dividend yield can provide a bit of extra income, though IWM is a vehicle more geared towards growth. It has a modest expense ratio of 0.20%.
The largest sector weighting in this fund is financial services, 23.62%; followed by technology, 17.92%; and healthcare, 15.36%. The 10 largest holdings here account for just 3.12% of assets, leaving plenty of room for IWM’s expansive range of positions to have an impact. The top holdings include Quorvo Inc. (QRVO), 0.54%; Isis Pharmaceuticals Inc. (ISIS), 0.45%; Brunswick Corp (BC), 0.29%; Office Depot Inc. (ODP), 0.28%; and Graphic Packaging Holding Co. (GPK), 0.28%.
For investors seeking an ETF that lets them speculate in a large number of smaller companies, rather than a comparatively modest number of larger ones, iShares Russell 2000 ETF (IWM) is a useful and convenient fund to consider.
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In case you missed it, I encourage you to read my e-letter column from last week about an emerging markets ETF. I also invite you to comment in the space provided below.
