VUG vs. IWO: Which Growth ETF Is Better for Investors Right Now?
Key Points
iShares Russell 2000 Growth ETF focuses on small-cap companies while Vanguard Growth ETF targets large-cap market leaders.
Vanguard Growth ETF features a significantly lower expense ratio and higher five-year total returns.
iShares Russell 2000 Growth ETF has a more balanced sector distribution across technology, industrials, and healthcare.
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Vanguard Growth ETF (NYSEMKT:VUG) provides low-cost exposure to large-cap giants, whereas iShares Russell 2000 Growth ETF (NYSEMKT:IWO) targets smaller, high-growth companies with a more diversified sector mix.
Investors seeking growth can approach the market through different lenses. While VUG tracks established industry leaders that dominate their fields, IWO looks at the more volatile small-cap segment. This comparison explores whether the premium cost of the iShares fund is justified by its unique market positioning.
Snapshot (cost & size)
| Metric | VUG | IWO |
|---|---|---|
| Issuer | Vanguard | iShares |
| Expense ratio | 0.03% | 0.24% |
| 1-yr return (as of 6/12/26) | 21.2% | 36.3% |
| Dividend yield | 0.4% | 0.4% |
| Beta | 1.24 | 1.46 |
| AUM | $393.8 billion | $14.9 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
The Vanguard fund maintains a clear cost advantage with an expense ratio of 0.03%, compared to 0.24% for the iShares fund. Both ETFs offer a trailing-12-month distribution yield of 0.4%, meaning income is likely a secondary consideration for most investors.
Performance & risk comparison
| Metric | VUG | IWO |
|---|---|---|
| Max drawdown (5 yr) | (35.6%) | (42.0%) |
| Growth of $1,000 over 5 years (total return) | $1,907 | $1,278 |
What's inside
iShares Russell 2000 Growth ETF focuses on small-cap companies with strong growth characteristics and has been available since 2000. It holds over 1,000 stocks, with top positions including Bloom Energy Corp (NYSE:BE) at 3.2%, Credo Technology Group Holding Ltd (NASDAQ:CRDO) at 2.3%, and Sterling Infrastructure Inc (NASDAQ:STRL) at 1.4%. The fund allocates 25% to technology, 24% to industrials, and 22% to healthcare. It has a trailing-12-month dividend of $1.51 per share.
Vanguard Growth ETF (NYSEMKT:VUG) launched in 2004 and holds 153 companies. It is concentrated in technology at 69%, with its largest positions including Nvidia (NASDAQ:NVDA) at 13.1%, Apple (NASDAQ:AAPL) at 12.32%, and Microsoft (NASDAQ:MSFT) at 8.99%. Other major sectors for the Vanguard fund include communication services at 17% and consumer cyclicals at 12%. This fund paid $0.33 per share over the trailing 12 months.
For more guidance on ETF investing, check out the full guide at this link.
What it means for investors
VUG is one of the most popular growth ETF options, and with nearly $400 billion in assets, it’s certainly a behemoth in its own right. It seeks to track the CRSP US Large Cap Growth Index, which takes the largest 85% of public companies by market cap and filters them through 11 factors to separate the growth stocks from the value stocks. The result is a huge overweight in technology stocks and a concentration in today’s market leaders. The fund’s ultra-low expense ratio means you keep more of your own money invested while these market winners keep winning.
On the other end of the size spectrum is IWO, which tracks an index that also screens for growth stocks, but from the small-cap category instead of the large-cap camp. That means it holds companies whose market caps are typically below $2 billion. The theory is, instead of investing in Nvidia with VUG, you’re investing in the next Nvidia with IWO. And you won’t need all of the holdings to be winners — just one big move from one stock in this group could lead to monster returns. In fact, IWO has outperformed VUG over the last year. But small caps can also be volatile to the downside. Here’s what iShares says: “Small-capitalization companies may be less stable and more susceptible to adverse developments, and their securities may be more volatile and less liquid than larger capitalization companies.”
If you’re only looking to add one ticker to your portfolio, and you want it to target growth, VUG’s stability, size, and low fees make it a better option. But VUG is extremely concentrated — if you already own its top holdings or another market-cap-weighted ETF that gives you a lot of exposure to them, it may be better to diversify with IWO instead.
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Sarah Sidlow has positions in Apple, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Apple, Bloom Energy, Microsoft, Nvidia, Sterling Infrastructure, and Vanguard Growth ETF. The Motley Fool has a disclosure policy.
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