Vanguard Russell 2000 ETF

VTWO

Market cap $14B

The Russell 2000 index is one of the most popular market benchmarks for small-cap stocks. The Vanguard Russell 2000 ETF (VTWO) casts the widest net for this space, but that also means it includes both the good and the bad.

The market has begun turning away from large-cap tech in 2026. Small caps have been one of the biggest beneficiaries of that rotation.

The Russell 2000 index follows approximately 2,000 of the smallest companies listed on American stock exchanges. The Russell is off to a blistering start in 2026, up 8% so far compared to the more widely followed S&P 500's 1.4%.

Small-cap stocks occupy a strange place in most portfolios. They deliver the highest long-term returns of any major asset class, yet vanish from investor attention for years at a time.

If you're interested in broad exposure to the Small Cap Blend segment of the US equity market, look no further than the Vanguard Russell 2000 ETF (VTWO), a passively managed exchange traded fund launched on September 22, 2010.

Small-caps are off to an impressive start in 2026, putting this ETF in the spotlight. This Vanguard ETF features a sizable lineup of domestic small-cap firms.

At the beginning of 2025, I called the Vanguard Russell 2000 ETF one of the best investments for the year. It didn't perform poorly by any means, but it underperformed the S&P 500.

Small-caps are already outperforming the S&P 500 by 8% in the early stages of 2026. However, their overall quality is poor and they tend to get volatile at the wrong times.

A well-rounded portfolio should include different industries, company sizes, and locations. An S&P 500 ETF can be a foundational investment in most investors' portfolios.

2026 could see a market rotation that finally favors more cyclical and defensive areas of the market. Bonds and dividend stocks are two areas that could benefit from a growth slowdown in the U.S. economy.