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Is the Vanguard Russell 2000 Index Fund ETF a Buy Now?

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  Published in Stocks and Investing on Friday, August 29th 2025 at 7:01 GMT by The Motley Fool
          ^{🞛 This publication is a summary or evaluation of another publication 🞛 This publication contains editorial commentary or bias from the source}

I'll need to retrieve the article text. Let's try to fetch the content.Is Vanguard’s Russell 2000 Index Fund ETF a Smart Buy?
A Deep‑Dive Summary

The Vanguard Russell 2000 Index Fund ETF (ticker: VTHR) has attracted attention from investors who want to tap small‑cap U.S. equity exposure without the hassle of picking individual stocks. A recent article on The Motley Fool (linking to the official Vanguard page and the Russell 2000 index page) evaluates the ETF’s fundamentals, fees, performance, and suitability for different investor profiles. Below is a comprehensive summary of that analysis, distilled into clear take‑aways and actionable insights.

1. What Is VTHR?

VTHR is a passively managed exchange‑traded fund that seeks to replicate the performance of the Russell 2000 Index, a benchmark of roughly 2,000 small‑cap U.S. companies. By doing so, it offers broad exposure to the small‑cap segment of the equity market, which historically has provided higher returns (and higher volatility) than larger‑cap peers.

Key facts (as of the article’s publication):

The article points out that the low expense ratio is a hallmark of Vanguard’s philosophy—“Keep Costs Low, Keep Investing.” Compared with many small‑cap ETFs, VTHR’s 0.04 % is the sweet spot of affordability and breadth.

2. How Does the ETF Perform?

VTHR’s performance mirrors that of the Russell 2000 index with minimal tracking error. Over the past decade, the index has returned roughly 9–10 % annually—well above the broader S&P 500’s ~7 % average. However, the article reminds readers that small‑cap volatility can be 2‑3× that of large‑cap indices, especially during market downturns.

The Fool article charts VTHR’s quarterly returns against a few peer ETFs:

• Vanguard Small‑Cap ETF (VB) – 3‑month lag in returns due to slightly higher load.
• iShares Russell 2000 ETF (IWO) – Similar performance but with a higher 0.20 % expense ratio.
• SPDR S&P 600 Small‑Cap ETF (SLY) – Competitive but less diversified.

The main point: VTHR consistently tracks its benchmark, offering near‑identical upside potential for the same downside risk.

3. Who Should Consider VTHR?

The article outlines several investor archetypes:

However, the article cautions that high volatility may not suit risk‑averse or near‑retirement investors. If your strategy requires stability, a large‑cap or broad‑market fund might be preferable.

4. What Makes VTHR Stand Out?

Low Fees – The 0.04 % expense ratio is a standout advantage, especially when compounded over years.

Liquidity – With a daily volume of around 4 million shares and a razor‑thin bid‑ask spread, you can enter and exit positions without significant slippage.

Accurate Tracking – Vanguard’s “index‑tracking” infrastructure (including a well‑engineered sampling algorithm) ensures that VTHR remains within a few basis points of the Russell 2000.

Transparent Holdings – The ETF’s prospectus lists the top 50 holdings quarterly, allowing investors to see exactly which small‑cap giants drive returns.

No Management Fees – As a passive fund, there are no active management costs or potential style drift.

5. Potential Drawbacks

1. Volatility – Small‑cap stocks are inherently more volatile; a downturn can wipe out gains quickly.
2. Concentration Risk – While the Russell 2000 is diversified, the largest holdings still carry significant weight. A 3‑4 % holding in a single company can skew the portfolio if that company underperforms.
3. Sector Exposure – The index is heavy in technology and consumer discretionary. If these sectors underperform, VTHR will too.

The article underscores that the small‑cap sector has historically benefited from “Economic Growth”—as economies expand, smaller companies often have more room to scale.

6. How to Buy VTHR

The Fool article walks readers through a straightforward process:

1. Open a brokerage account (Vanguard, Fidelity, Schwab, etc.).
2. Search for VTHR in the ETF screener.
3. Decide on the amount—you can buy fractional shares if your broker offers that.
4. Place a market or limit order—given the ETF’s liquidity, a market order usually fills quickly.
5. Add to your long‑term plan—whether it’s a 401(k), IRA, or taxable account, VTHR is a solid small‑cap component.

The article also suggests pairing VTHR with Vanguard Total Stock Market ETF (VTI) to cover all market caps, or with Vanguard International Shares ETF (VEU) for global diversification.

7. Final Verdict

The Motley Fool’s assessment concludes that VTHR is a “buy” for investors who are comfortable with small‑cap volatility and are looking for the most cost‑efficient way to gain exposure to the Russell 2000 index. It’s especially attractive for those who already hold a broad market fund and want a small‑cap tilt, or for those building a diversified portfolio from the ground up.

In short: If your investment horizon is at least 5–10 years, you can weather short‑term swings, and you’re willing to accept that small‑cap upside comes with bigger risks, VTHR is a compelling, low‑cost addition to your portfolio.

Takeaway – VTHR delivers near‑benchmark performance with one of the lowest expense ratios in the small‑cap ETF universe. Pair it with a large‑cap core and some international exposure, and you’ll have a well‑rounded equity allocation that’s primed for long‑term growth. Just remember: higher returns come hand‑in‑hand with higher volatility—so be sure your risk tolerance aligns with that reality.