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4d ago

Investors Look Beyond S&P 500 as Small Caps Hit Records and Outperform

Advisors cite lost diversification from tech-heavy S&P 500 exposure, pushing interest toward low-cost small-cap funds such as Vanguard’s VTWO.

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Overview

  • The Russell 2000 set an all-time high this week and is up more than 28% over six months, outpacing the S&P 500, according to CNBC.
  • Gavin Filmore of Tidal Financial Group said clients are moving past the “VOO and chill” approach in search of broader diversification.
  • Strategas Securities’ Todd Sohn highlighted that technology now exceeds 35% of the S&P 500 as defensive sectors sit at a record low combined 19%, per FactSet.
  • Vanguard’s Russell 2000 ETF (VTWO) tracks small caps with industrials as the largest sector at 18.9%, carries a 0.07% expense ratio, and features low single-stock concentration with its top 10 positions under 5% of assets.
  • VTWO excludes the megacap AI leaders driving recent market gains and has returned 148% over 10 years versus 295% for the S&P 500, with future small-cap performance tied to interest-rate moves and major large-cap earnings due next week.