It’s been a big-cap world, but there’s more to the stock market than just the Magnificent 7. I’ve never understood why “the market” in most people’s minds doesn’t include all stocks. of iShares Russell 3000 ETF (NEW YORK:IWV) brings us closer to what the real market should be. And with the potential for small- and mid-caps to outperform, IWV makes a better equity allocation than the SPDR® S&P 500 ETF Trust (SPY) or Invesco QQQ Trust ETF (QQQ) in my opinion here.
IWV is an exchange-traded fund, or ETF, launched and managed by BlackRock Fund Advisors. The main objective of the fund is to replicate the investment results of a broad-based index composed of US stocks, specifically the Russell 3000 Index.
IWV provides exposure to a wide range of US companies, providing access to approximately 2,700 domestic stocks under a single fund. it is a suitable investment vehicle for those looking for long-term growth in their portfolio. IWV has net assets worth over $11 billion and a relatively low expense ratio of 0.20%.
Top 5 possessions in IWV
The downside here is that this remains market cap-weighted, meaning it’s still largely driven by the same names that drive the S&P 500 (SP500). These actions include:
- Apple Inc. (AAPL): A multinational technology company known for its innovative consumer electronics, software and online services.
- Microsoft Corp (MSFT): A leading global technology firm that develops, licenses and sells computer software, consumer electronics, personal computers and related services.
- Amazon.com, Inc. (AMZN): A multinational technology corporation focusing on e-commerce, cloud computing, digital broadcasting and artificial intelligence.
- Nvidia Corp. (NVDA): A multinational technology company prominent in the design of graphics processing units (GPUs) for the gaming and professional markets.
- Alphabet Inc. Class A (GOOGLE): The parent company of Google and several other companies previously owned by Google. It specializes in internet-related services.
These companies, all from the technology sector, hold a significant weight in IWV’s portfolio, despite the fund’s large number of holdings.
Sector composition and weightings
Information and communication technology, healthcare and finance hold a combined weight of over 50% in IWV’s portfolio.
Comparing IWV to its peers, it has the highest expense ratio of 0.20%. Other similar ETFs like the SPDR Portfolio S&P 1500 Composite Stock Market ETF (SPTM), iShares Core S&P Total US Stock ETF (THIS), Vanguard Total Stock Market ETF (VTI), Schwab Broad US Market ETF (SCHB), and the Vanguard Russell 3000 ETF (VTHR) all have an expense ratio below 0.10%. Not a huge difference, but it matters over time.
The pros and cons of investing in IWV
Investing in IWV comes with its own set of advantages and disadvantages.
- Diversification: IWV provides broad exposure to US companies, covering almost the entire US stock market. This diversification helps mitigate the risk associated with investing in a single company or sector.
- Strong and sustained price growth: IWV has historically shown strong and consistent price growth, matching the returns of the S&P 500 index over the years.
- Lowest expense ratio: Despite being a passive fund with a low turnover ratio, IWV has a relatively low expense ratio of 0.20%.
- Higher fees: Compared to its peers, IWV has the highest expense ratio, which can impact overall returns for investors.
- Poor performance: IWV has underperformed other similar ETFs, particularly over the past 10 years due to its small-cap exposure.
Conclusion: To invest or not to invest
The iShares Russell 3000 ETF (IWV) presents a solid investment option for those looking for broad exposure to the US stock market. Its strong diversification, stable price growth and lower expense ratio are attractive features for potential investors. However, its higher fees and poor performance compared to its peers are factors to consider. I would prefer this longer term to get exposure to more than just large cap stocks.
Markets are not as efficient as conventional wisdom would have you believe. Gaps often appear between market signals and investor reactions that help give an indication of whether we are in a “risk-on” or “risk-on” environment.
of Lead Lag Report can give you an edge in reading the market so you can make asset allocation decisions based on award-winning research. I’ll give you the signals — it’s up to you to decide whether to go on the offensive (ie, add exposure to risky assets like stocks when the risk is “on”) or play the defensive (ie, lean right more conservative assets such as bonds/cash when the risk is “off”).