The Russell 2000 Index is Wall Street’s premier small-cap equity benchmark. It was designed to track the performance of the roughly 2,000 stocks in the broader Russell 3000 Index with market capitalizations that range from about $300 million to about $2 billion. Interestingly, while the Russell 2000 includes 66% of the stocks in the Russell 3000, it covers only about 10% of the total market cap of its parent index. In short, there is a tremendous opportunity for broad diversification and capital appreciation in the Russell 2000.
Administered by FTSE Russell, the Russell 2000 is a cap-weighted index. This means that companies with larger market caps have an outsized influence on performance, even as it is considered a small-cap benchmark. The index is rebalanced and reconstituted in June of each year. This ensures it reflects the most up-to-date small-cap universe possible without undue activity. Real-time adjustments to the Russell 2000 are generally only made in the case of mergers, acquisitions and other extraordinary events that cause companies to become too large too fast.
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As a small-cap index, the Russell 2000 involves more risk because smaller companies tend to be more volatile than their larger counterparts. But with greater risk comes the potential for greater reward. This makes Russell 2000 exchange-traded funds (ETFs) a “great choice for younger investors who have time to let their portfolio grow and weather the market volatility,” says Wheeler Pulliam, a certified financial planner and financial consultant at Xponify Financial in Hickory Creek, Texas. Small caps may be less appropriate for older investors who need to take regular income from their portfolio or have shorter timeframes.
When choosing a Russell 2000 ETF, Pulliam says to look at two key metrics: how closely the ETF mirrors the actual index and the expense ratio. “If you see an ETF that closely mirrors the actual index, and has a low expense ratio, then that is the ETF you want,” he says.
The following list represents five Russell ETFs that meet this criteria. So, if you can weather the storms of the small-cap universe, any of these five ETFs could be a good fit for your portfolio:
| ETF | Expense Ratio | Total Assets |
| iShares Russell 2000 ETF (ticker: IWM) | 0.19% | $67.8 billion |
| Vanguard Russell 2000 Index Fund ETF Shares (VTWO) | 0.07% | $13.6 billion |
| Fidelity Enhanced Small Cap ETF (FESM) | 0.28% | $2.9 billion |
| iShares Russell 2000 Growth ETF (IWO) | 0.24% | $13.1 billion |
| Vanguard Russell 2000 Value Index Fund ETF Shares (VTWV) | 0.10% | $877.9 million |
iShares Russell 2000 ETF (IWM)
The natural place to kick off this list is with the largest Russell 2000 ETF: IWM. This fund has nearly $70 billion in assets and can trade upwards of 37 million shares a day. That kind of volume guarantees liquidity and efficient pricing.
IWM also lives up to the low-cost promise expected of a passive index fund with an expense ratio of 0.19%. While this isn’t the cheapest option on this list, it’s still reasonable for this type of fund.
At least 80% of IWM’s net assets will be strictly invested in the index. The remaining assets may be invested in derivatives or cash equivalents, but only in service of tracking the index, something the fund has done with near-perfect accuracy since inception. It typically lags the underlying index by less than 0.1 percentage point. Index funds almost always lag their underlying index because of fund expenses.
The fund has a current 30-day SEC yield of 1.2%.
Vanguard Russell 2000 Index Fund ETF Shares (VTWO)
For the cheapest Russell 2000 ETF on this list, you’ll want VTWO. Vanguard is known for high-quality, low-cost index funds, and this fund lives up to that reputation with an expense ratio of only 0.07%. That’s just $7 each year per $10,000 invested.
It also closely mirrors the Russell 2000 Index, thanks in part to it being fully invested at all times; the managers do not maintain a cash position. This minimizes the cash drag on the portfolio.
Vanguard employs a passive full-replication strategy in the management of this index fund. That ensures good diversification across industry sectors and among both growth and value investment styles.
It’s not as big nor as highly traded as IWN. However, with around $13.6 billion in assets and roughly 2.3 million shares trading hands each day, it’s still a liquid option. It also has a 30-day SEC yield of about 1.2%.
[SEE: Best-Performing ETFs.]
Fidelity Enhanced Small Cap ETF (FESM)
In most cases, if you’re looking for broad market exposure, a passively managed fund is the way to go. These funds offer tremendous advantages like low expense ratios, tax efficiency from lower turnover and better correlation with the market. That said, FESM is not a passively managed fund, but it still deserves a spot on this list.
As an actively managed strategy based on the Russell 2000, FESM is better able to capitalize on any market inefficiencies. Since fewer analysts cover small-cap stocks relative to large-cap stocks, information gaps can create opportunities for savvy fund managers.
Unlike IWM and VTWO, which are designed to strictly replicate the index, FESM employs a quantitative strategy that seeks to outperform the Russell 2000. It normally invests at least 80% of assets in the index’s common stocks, but the fund managers use computer-aided analyses of factors like valuation, growth and profitability to select a diversified group of stocks with potential for higher total returns.
This enhanced-index approach means the fund aims for better returns than its index peers but comes with a slightly higher expense ratio of 0.28%. It has outperformed VTWO and IWM every year for the past five years, even during the 2022 downturn, and sometimes by as much as five percentage points for the year.
However, it is also much smaller at less than $3 billion in assets and more thinly traded with around 410,000 shares trading hands each day, on average. It also has a 30-day SEC yield of less than 1%.
iShares Russell 2000 Growth ETF (IWO)
Active versus passive management aren’t the only ways for funds to differentiate themselves. The previous funds on today’s list all mirrored the full Russell 2000 Index. The next two will highlight growth and value variations of that benchmark.
IWO tracks the Russell 2000 Growth Index. That index is, of course, a subset of the larger benchmark. The growth version targets only the funds within the index that are expected to grow at an above-average pace. Since the small-cap segment is already fertile ground for exponential growth, this approach only enhances that potential.
This over $13 billion fund is suitable for investors who want a straightforward, index-tracking method to access this aggressive corner of the market. Just be ready for a rocky ride: The growth segment can be even more volatile than the broader Russell 2000 or its value component.
The fund is also less liquid than its broader counterpart with around 377,000 shares trading hands each day. It also has a lower yield of 0.4%. That said, you typically don’t target growth companies for their yield; the hope is that the companies are reinvesting in their business to grow.
Vanguard Russell 2000 Value Index Fund ETF Shares (VTWV)
Now for the opposite side of the coin: VTWV offers a value approach to the Russell 2000. The “value premium” is often the most robust and reliable in the small-cap segment, making a value approach to the Russell 2000 compelling.
Unlike its growth counterpart, which targets aggressive expansion, VTWV focuses on companies within the Russell 2000 that exhibit “value” characteristics. These are publicly traded companies that, according to Wall Street, are undervalued based on common financial metrics like price-to-earnings ratio, revenue and relative dividend yield.
VTWV screens out and eliminates growth stocks that may be overvalued and have less room to run. Typical of Vanguard index funds, this ETF has a very low expense ratio of 0.1%. It also closely tracks the Russell 2000 Value Index.
While it is the smallest ($878 million) and most thinly traded (14,500 shares per day, on average) fund on this list, it also provides the highest 30-day SEC yield at nearly 2%.
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5 Best Russell 2000 ETFs to Buy Now originally appeared on usnews.com
Update 10/31/25: This story was previously published at an earlier date and has been updated with new information.
