VOO Has Delivered Higher Returns, But IWM Provides Broad Small Cap Exposure
The Motley Fool
by newsfeedback@fool.com (Jake Lerch)February 14, 2026
AI-Generated Deep Dive Summary
Vanguard S&P 500 ETF (VOO) and iShares Russell 2000 ETF (IWM) represent two distinct approaches to U.S. equity investing, catering to different investor needs. While VOO focuses on the largest 500 companies in the country, offering stability and higher returns at a lower expense ratio, IWM provides broad exposure to small-cap stocks through its tracking of the Russell 2000 index. This comparison highlights the importance of aligning investment goals with the right ETF strategy.
VOO’s concentration on large-cap stocks has historically delivered strong returns and lower volatility compared to IWM, which operates in a more volatile sector mix due to its small-cap focus. VOO’s expense ratio is notably lower, reflecting Vanguard’s cost-effective approach, while IWM compensates with greater diversification across nearly 2,000 smaller companies. These differences make each ETF appealing for specific investment objectives.
For those seeking stability and growth tied to established market leaders, VOO offers a reliable option with significant historical performance. On the other hand, IWM attracts investors looking to tap into the potential of smaller, high-growth companies, despite its higher volatility and expense ratio. Understanding these trade-offs helps investors decide which ETF aligns best with their risk tolerance and financial goals.
This comparison underscores the importance of evaluating both return potential and portfolio diversification when selecting an ETF. Whether prioritizing stability or seeking exposure to dynamic small-cap growth, VOO and IWM provide clear pathways for different investment strategies. Investors can leverage this insight to build a more informed and tailored investment strategy.
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Originally published on The Motley Fool on 2/14/2026