Is the Vanguard Russell 2000 ETF a Buy Now?

Group 1: ETF Overview - The Vanguard Russell 2000 ETF (VTWO) has reached a record high and has shown more momentum than the S&P 500 over the last three months [1] - The ETF has a low annual expense ratio of 0.07%, significantly lower than the average of 0.97% for similar funds [2] - It aims to track the performance of the Russell 2000 index, which includes approximately 2,000 small-cap stocks [3] Group 2: Current Performance and Market Conditions - The ETF currently holds 1,999 stocks, with no single stock exceeding 0.64% of the total portfolio, minimizing the impact of any single stock's poor performance [4] - Recent gains in the ETF are attributed to anticipation of interest rate cuts by the Federal Reserve, with a 0.25% cut announced on September 17, 2025 [7] - Small-cap stocks are more sensitive to interest rates, making them potentially more responsive to further rate cuts, which could benefit the ETF [8] Group 3: Valuation and Historical Performance - The Vanguard Russell 2000 ETF has a price-to-earnings (P/E) ratio of 18.6, compared to the S&P 500's higher P/E ratio of 30.85, indicating better valuation [9] - Historically, small-cap stocks have outperformed large-cap stocks over the long term, although the Vanguard Russell 2000 has returned around 143% over the last 10 years, compared to 304% for the S&P 500 [10] Group 4: Potential Challenges - The U.S. economy is facing challenges, including a weakening employment picture, which could negatively impact smaller companies more than larger ones [12] - The demand for artificial intelligence (AI) has favored large-cap stocks, which may continue to outperform small-cap stocks in the near future [13] - Despite these challenges, the Vanguard Russell 2000 ETF is still viewed as a good investment option at this time [14]