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IWO Offers Broader Diversification but Slower Growth Than VOOG
The Motley Fool· 2025-12-16 20:55
Core Viewpoint - The Vanguard S&P 500 Growth ETF (VOOG) and iShares Russell 2000 Growth ETF (IWO) present distinct investment profiles, with VOOG focusing on large-cap growth stocks and IWO on small-cap growth companies, impacting their cost, volatility, and diversification characteristics [1][2]. Cost and Size Comparison - VOOG has a lower expense ratio of 0.07% compared to IWO's 0.24%, making it more cost-effective for long-term investors [3][4]. - As of December 11, 2025, VOOG reported a 1-year return of 22.3% while IWO had a return of 13.5% [3]. - VOOG has an Assets Under Management (AUM) of $21.7 billion, significantly higher than IWO's $13.6 billion [3]. Performance and Risk Metrics - Over the past five years, VOOG experienced a maximum drawdown of -32.74%, while IWO faced a larger drawdown of -42.02% [5]. - An investment of $1,000 in VOOG would have grown to $1,973 over five years, compared to $1,190 for IWO [5]. Portfolio Composition - IWO holds 1,086 small-cap companies with significant sector weights in healthcare (25%), industrials (22%), and technology (21%), ensuring broad diversification [6]. - VOOG is heavily concentrated in large-cap growth stocks, with technology comprising 41% of its portfolio, featuring top holdings like Nvidia, Microsoft, and Apple [7]. Investment Implications - VOOG is suitable for investors seeking lower-risk growth through established large-cap companies, primarily in the technology sector [9][11]. - IWO appeals to those looking for higher growth potential from smaller companies, despite a higher risk profile and expense ratio [10][11].
