IWO vs. VUG: One Offers Broad Growth Exposure While the Other Has Lower Fees

Vanguard Growth ETF (VUG 2.60%) and iShares Russell 2000 Growth ETF (IWO 2.35%) both target U.S. growth stocks, but VUG focuses on large-cap names with ultra-low costs, while IWO delivers small-cap exposure with more sector diversification but higher fees.

Both funds aim to capture U.S. growth equity trends, but their approaches and portfolios are starkly different. VUG tracks large-cap growth stocks, dominated by a handful of tech giants, while IWO dives into the small-cap growth universe, offering broader industry representation. This comparison explores their costs, returns, risk, and what’s really inside each ETF.

Snapshot (cost & size)

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.

VUG is significantly more affordable, charging just 0.03% annually versus IWO’s 0.24%, but both currently yield 0.5%, so income-focused investors will not see a difference on payout alone.

Performance & risk comparison

What’s inside

IWO holds over 1,100 stocks from the small-cap growth segment, with the largest weights in healthcare (24%), technology (23%), and industrials (22%). Its top holdings—Bloom Energy Class A Corp (BE 11.18%), Fabrinet (FN 10.32%), and **Credo Technology Group Holding Ltd **(CRDO 7.19%)—are each a small fraction of assets, reflecting a diverse portfolio. Launched nearly 26 years ago, IWO offers long-term access to smaller, faster-growing U.S. companies, with no unusual fund quirks or leverage resets.

By contrast, VUG concentrates over half its portfolio in technology, with communication services and consumer cyclicals filling out much of the rest. Its top holdings—NVIDIA Corp (NVDA 4.16%), Apple Inc (AAPL +0.17%), and** Microsoft Corp** (MSFT 1.40%)—account for more than a third of assets, making it more top-heavy. VUG tracks the CRSP US Large Cap Growth Index, so its sector and stock weights reflect the dominance of mega-cap tech in today’s market.

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What this means for investors

For investors interested in increasing their exposure to growth stocks, Vanguard Growth ETF (VUG) and iShares Russell 2000 Growth ETF (IWO) are both exchange-traded funds (ETFs) worth considering. Here is how these two ETFs stack up against one another.

First, there’s VUG. This ETF, which focuses on mega-cap stocks, excels in several key areas. For one, it has delivered superior long-term performance. $1,000 invested in VUG five years ago would be worth $1,756 today, versus $1,077 for IWO. In addition, VUG has a rock-bottom expense ratio of 0.03%, compared to 0.24% for IWO.

As for IWO, it has the edge in diversification. The fund holds over 1,100 stocks. What’s more, those stocks are small-cap stocks, offering investors a counterweight to big tech stocks which dominate the VUG and many other index-linked ETFs.

In summary, VUG and IWO are both intriguing choices for investors. While VUG edges out IWO on long-term performance and fees, many investors will find a place for IWO in their portfolios due to its diversification.