IWM and IWO Provide Small-Cap Diversification, But One Offers More Growth Potential for Investors

Core Insights - The iShares Russell 2000 ETF (IWM) offers lower costs, higher yield, and broader diversification compared to the iShares Russell 2000 Growth ETF (IWO), which focuses on growth-oriented small-cap stocks [1][2] Cost and Size Comparison - IWM has a lower expense ratio of 0.19% compared to IWO's 0.24% - IWM provides a higher dividend yield of 0.97% versus IWO's 0.65% - Assets Under Management (AUM) for IWM is $72.5 billion, significantly larger than IWO's $13.2 billion [3] Performance and Risk Comparison - IWO has a maximum drawdown of -42.02% over five years, while IWM's is -31.91% - The growth of $1,000 invested over five years would result in $1,334 for IWM compared to $1,212 for IWO [4] Portfolio Composition - IWM holds 1,951 stocks across all sectors, with notable tilts towards healthcare (18%), financials (18%), and industrials (17%) - IWO focuses on a more concentrated portfolio with top sectors including healthcare (25%), industrials (22%), and technology (21%) [5][6] Investment Implications - IWM is more diversified, providing broader exposure to the small-cap market, which may help limit risk during volatility - IWO offers a targeted approach with higher potential for growth but comes with a more concentrated risk profile [8][9]