IWO Offers Broader Diversification but Slower Growth Than VOOG

Vanguard S&P 500 Growth ETF (NYSEMKT:VOOG) and iShares Russell 2000 Growth ETF (NYSEMKT:IWO) differ sharply on cost, volatility, and portfolio makeup, with VOOG offering lower expenses and a tech tilt, while IWO brings broader diversification and small-cap growth exposure.

VOOG tracks large-cap U.S. growth stocks in the S&P 500, making it a staple for investors seeking blue chip growth exposure. IWO, in contrast, focuses on small-cap companies with growth characteristics, offering a much broader portfolio and exposure to different sectors and risk dynamics. Comparing these two could help clarify which growth style and risk profile may appeal more to a given investor.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns. The 1-yr return represents total return over the trailing 12 months.

IWO costs more to own each year, with an expense ratio that is much higher than VOOG. At 0.24%, every $1,000 invested would cost $2.40 each year in fees compared to $0.60 for a similar investment in VOOG at its 0.06% expense ratio. This means VOOG looks more affordable for long-term holders.

Performance & risk comparison

What's inside

IWO tracks small-cap U.S. stocks with growth attributes, holding 1,086 companies across a wide swath of sectors. Its largest sector weights are in healthcare (25%), industrials (22%), and technology (21%), and no single holding exceeds 1.5% of assets. Top positions include Bloom Energy, Credo Technology Group, and Fabrinet. With over 25 years since inception, IWO offers long-term index exposure and sector diversification that could appeal to those seeking potential small-cap outperformance.

VOOG, by contrast, is heavily concentrated in large-cap growth names, with technology making up 41% of the portfolio. Its top holdings — Nvidia, Microsoft, and Apple — dominate the fund’s allocation, resulting in a more focused, blue chip growth profile. This creates a distinct tilt compared to IWO’s more balanced sector approach and much larger holdings roster.

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What this means for investors

VOOG and IWO provide investors with two very different pathways to invest in growth stocks. VOOG focuses on larger-scale, growth-focused companies in the S&P 500. A significant percentage of its holdings are large technology companies. This fund offers passive exposure to large-cap growth stocks for a very low cost.

IWO, on the other hand, focuses on companies much earlier in their growth cycle. These smaller companies tend to have a higher risk profile. However, they also have more growth potential over the long term. This fund offers broad exposure to smaller companies, which helps reduce risk compared to investing in these stocks individually. While it does have a higher expense ratio than VOOG, it's still a reasonable fee.

The choice really boils down to personal preference. If you want lower risk growth, go with VOOG. IWO is the better option for those seeking higher growth potential over the longer term.

Glossary

Expense ratio: The annual fee, as a percentage of assets, that investors pay to own a fund.
Volatility: The degree of variation in an investment’s price over time, indicating risk or price fluctuations.
Drawdown: The maximum observed loss from a peak to a trough before a new peak is reached.
Beta: A measure of an investment’s volatility compared to the overall market, typically the S&P 500.
Dividend yield: The annual dividends paid by a fund, expressed as a percentage of its price.
AUM (Assets Under Management): The total market value of assets that a fund manages on behalf of investors.
Small-cap: Refers to companies with relatively small total market values, typically under $2 billion.
Large-cap: Refers to companies with large total market values, usually over $10 billion.
Sector diversification: Investing across multiple industry sectors to reduce risk from any single sector.
Index exposure: The extent to which a fund’s performance tracks a specific market index.
Growth stocks: Shares of companies expected to grow earnings or revenue faster than the overall market.
Blue-chip: Well-established, financially sound companies with a history of reliable performance.

Matt DiLallo has positions in Apple and has the following options: short January 2026 $265 calls on Apple. The Motley Fool has positions in and recommends Apple, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.