Is IWM A Good ETF?

JPMorgan’s Head of Equity Lee Spelman on Active Vs Passive Investing

Is IWM A Good ETF?

IWM tracks a market-cap-weighted index of US small-cap stocks. The index selects stocks ranked 1,001-3,000 by market cap. 

IWM is among the best choices in the crowded US small-cap field.

The fund tracks the popular Russell 2000 index. IWM’s broad basket makes it one of the most diversified funds in the segment. Notably, the fund delves into micro-cap territory. Furthermore, has often been riskier than our neutral benchmark (as measured by beta) consequently. However, including micro-caps is a valid and possibly desirable approach to small-caps. In addition, IWM looks reasonably like the benchmark in most other respects.

The Russell 2000 index was founded in 1972 by FrankRussell, inc. There are 2000 component stocks in the Russell 3000 index, which is composed of the 2000 stocks with the smallest market capitalization.  The index contains about 11% of the market capitalization of the Russell 3000. The iShares Russell 2000 ETF seeks to track the investment results of an index composed of small-capitalization U.S. equities.

The main components of IWM

The top 10 stocks in the iShares Russell 2000 ETF are BHVN, XTSLA, SWAV, HALO, GTLS, MUSA, SAIL, SWX, SSB, and TENB.  Among them, BHVN, SWAV, and HALO all belong to the healthcare industry, accounting for 0.39%, 0.31%, and 0.29% respectively. In terms of the overall proportion of the industry constituted by this ETF, health Care also accounts for the largest proportion of 17.66%.  It was followed by finance at 17.06% and manufacturing at 14.88%, information technology at 13.59%, consumer discretionary at 10.19%. 

Increasing in Income and Employment will construct to an increase in the index

While income and employment in the health sector declined significantly in the spring of 2020 when COVID-19 began.  But now, as American businesses reopen, the economic impact of the early pandemic has begun to recalibrate.  Utilization of health services is increasing as providers are increasingly choosing care and patients who previously avoided health facilities because of social distancing are returning to use them.  Furthermore, utilization of health services continues to return to pre-pandemic levels.  Employment in the health services sector is rising as demand increases. 

Most health care industries had seen an upturn in jobs by the summer of 2022 – an upward trajectory that has largely continued.

By June of 2022, outpatient care centers and physician’s offices employed more people than they had in February 2020, and hospitals and home healthcare organizations were within 2% of their respective pre-pandemic employment numbers.

The health care industry’s performance is good and accounts for a large proportion of the index, we can infer that the index will continue to rise in the future for a period. 

The thaw in relations between Russia and Ukraine has helped the index increase.

Russia’s invasion of Ukraine will have an important impact on the US economic outlook this year. The conflict will drive up global commodity prices, fueling inflation and weighing on US economic growth. 

Relations between the two countries are now much better than before, with less impact on inflation and commodity prices, and the American economy is on the mend.  The finance and manufacturing industry together account for 31.94% of the index. The negative impact of these two industries is gradually fading, and the index will continue to rise. 


In conclusion, this year the one-two punch of declining stocks and bonds has taken a toll on ETFs across the board. The SPDR S&P 500 ETF Trust (SPY) is down by 22.7% to June, while the iShares Russell 2000 ETF (IWM) is lower by 26.1%. 

Lastly, it has fallen close to the lowest point. Through macro-economic analysis, it can be concluded that the index will have a distinct rise after that, so it is a good buy overall.

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Written by Anyu Mei

Is IWM A Good ETF?