The general theme is one of risk aversion. - Adam Cole
ETF profile and key features
Investors looking for exposure to the US small-cap space may consider the Vanguard Russell 2000 ETF (NASDAQ:VTWO), although as I explain later in my piece, an entry at this juncture may not be appropriate. As the name suggests, this fund's mandate is to closely track the Russell 2000 index, and it does an excellent job at this, with a best-in-class efficiency ratio of just 0.10%. VTWO is not as large as the stalwart in this space - iShares Russell 2000 (IWM) (VTWO's AUM is $2.2bn, whilst IWM's AUM is $44.6bn), but the latter has been around for a longer period (IWM has a 20-year history as opposed to VTWO's 10-year history).
Dividends
From an income perspective, you currently get a trailing yield of 1.48%, and until this year, the fund had a decent history of dividend growth (3 years of dividend growth at 10% CAGR). Unfortunately, in 2020, the dividend payouts have been disappointing (the Q1 payout was cut by -28% YoY, Q2 by -29% YoY, and Q3 by -35% YoY). Traditionally, the payouts in December have been the highest, but considering that the ETF is close to all-time highs, and the current dividend yield is still higher than the 4-year average dividend yield, I would expect the Q4 dividend payout to be cut on an annual basis, to bring further normalization in the yield. If you get in now, you're probably on course to receive a sub-standard income yield.
A blended ETF
There's been a lot of debate in recent weeks over the gap between growth and value stocks; as I mentioned recently in the Lead-Lag Report, given the overheated nature of the growth cohort and the wide divergence with value, it may be an opportune
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