VONG has a few clear advantages, but don't discount IWO's edge when it comes to diversification.The Vanguard Russell 1000 Growth ETF (VONG +0.77%) stands out for its lower fees and stronger recent returns, while the iShares Russell 2000 Growth ETF (IWO +0.33%) brings broader small-cap growth exposure and a modestly higher yield.Both funds target U.S. growth stocks. VONG focuses on large-cap names in the Russell 1000 Growth Index, whereas IWO tracks smaller, higher-growth companies in the Russell 2000 Growth ...

Core Insights - Small-cap U.S. stocks are showing signs of a potential comeback after a prolonged period of underperformance, although it remains uncertain if this is the beginning of a sustained rally or a temporary rise [1] Performance Overview - The iShares Russell 2000 index has increased by 11% over the past three months as of September 25, 2025, compared to a 7.6% gain in the S&P 500. However, year-to-date performance shows the iShares Russell 2000 ETF (IWM) up 8.2%, lagging behind the SPDR S&P 500 ETF Trust (SPY) which is up 12.6% [2] - The early-year weakness in small-cap stocks was largely attributed to President Trump's announcement of higher tariffs in April, which adversely affected smaller companies [2] Economic Factors - The Federal Reserve's decision to cut interest rates by 25 basis points in September and the indication of two more cuts this year could benefit small-cap stocks, with an 87.7% probability of another 25-bp cut in October [3] - The U.S. economy experienced a robust growth rate of 3.8% in Q2 of 2025, driven by stronger consumer spending, marking an upward revision from a previous estimate of 3.3% [4] - The positive economic growth is favorable for small-cap stocks, which are closely tied to the domestic economy [5] Valuation Metrics - As of September 19, 2025, the Russell 2000 is trading at a P/E ratio of 34.65, significantly higher than the year-ago level of 25.12, indicating that small caps may be overvalued [6] - In comparison, the Nasdaq 100 is trading at a P/E ratio of 32.65, and the S&P 500 at 25.30, suggesting that small-cap stocks are not cheap relative to other indices [7] ETF Performance - Notable small-cap U.S. ETFs that have performed well in Q3 include: - Fidelity Enhanced Small Cap ETF (FESM) – up 15.5% - Invesco S&P SmallCap 600 Pure Value ETF (RZV) – up 14% - Vanguard Russell 2000 Value ETF (VTWV) – up 13.6% - First Trust Small Cap Core AlphaDEX ETF (FYX) – up 13.5% - Janus Henderson Small Cap Growth Alpha ETF (JSML) – up 13.4% - iShares Russell 2000 Growth ETF (IWO) – up 13% [8] Market Concerns - President Trump's announcement on September 25, 2025, regarding new tariffs on various imports starting October 1 may introduce volatility in small-cap stocks in the short term [9]