A sound investment process and strong management team underpin Vanguard Russell 3000 ETF's Morningstar Medalist Rating of Silver. The portfolio maintains a cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy merits an Above Average Process Pillar rating. The strategy’s management team earns an Above Average People Pillar rating. The strategy's parent organization earns the firm a High Parent Pillar rating. People, Process and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Microsoft

Apple

NVIDIA

Amazon

Alphabet

Berkshire Hathaway Inc. - Ordinary Shares - Class B

Eli Lilly

JPMorgan Chase & Co

The fund samples the Russell 3000 Index, but it closely mimics its characteristics. The index ranks the 3,000 largest US stocks by their float-adjusted market cap after they pass basic liquidity and volume screens to ensure investability and easier tracking. Eligible stocks must have at least 5% of total shares publicly available and a minimum market cap of $30 million. In addition, the index does not implement buffers along the lower band of the market-cap breakpoint for current constituents to limit unnecessary turnover. The fund will likely incur higher transaction costs because the index sweeps in more thinly traded stocks and doesn't apply buffers. The index rebalances quarterly and reconstitutes annually.

The fund approximates the contours of the US stock market because it relies on the market's collective wisdom to size stock and sector weights. Its sector composition is in line with the Morningstar US Market Extended Index with no sector deviating by more than 1%, as of January 2024. Its value-growth bias also falls in line with the Morningstar bogy. 

Market-cap-weighting consistently guides the index into the largest and most established names despite its exposure to small-cap stocks. About 82% of the strategy's assets represented companies with a wide or narrow Morningstar Economic Moat Rating at the end of January 2024.

This portfolio tends to diversify away stock-specific risk. As of January 2024, its top 10 holdings represented 27% of the portfolio, generally much lower than peers. However, share of assets in the largest holdings steadily climbed in 2023, reflecting the market's narrow rally. The recent outperformance of a few technology companies, such as Apple AAPL, Microsoft MSFT, Amazon AMZN, Nvidia NVDA, Alphabet GOOGL, Tesla TSLA, and Meta Platforms META, commonly known as the "Magnificent Seven," ballooned the top 10 holdings to its highest percentage over the past 40 years. The index may become less concentrated if the market's rally broadens.

The portfolio managers use derivatives to equitize cash to keep pace with the benchmark. They also engage in securities lending to generate additional income, which may partially offset fees. The income is higher than other large-cap-focused Morningstar Category peers since small-cap stocks are not widely available for borrowing and generate greater lending revenue than large-cap stocks.

Note: The Process Pillar rating and analysis are indirectly assigned by an analyst. When an analyst covers a passively managed vehicle that tracks a particular index, Morningstar associates the Process Pillar rating assigned to that vehicle with the index concerned. Morningstar then maps the Process Pillar associated with a given index to any other uncovered passive strategies that track the same index. This ensures that the analyst’s view is leveraged whenever available and promotes consistency when analyzing passive vehicles associated with a given index.

Above Average

Process

Vanguard’s equity team is strong compared with others in the industry, resulting in an Above Average People Pillar rating. There are two managers listed on the fund: Nick Birkett, Walter Nejman. Together, they manage a total of two strategies, with a Gold asset-weighted average Morningstar Medalist Rating, demonstrating their potential to deliver positive alpha relative to the category median in aggregate.  

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

People

The Vanguard Group retains a High Parent rating. 

Mutual ownership, low costs, and a direct-to-investor playbook have helped spur Vanguard's leadership within the United States. Client service missteps notwithstanding, Vanguard over the past decade has grown its market share of U.S. open-end and exchange-traded fund assets at about a 5% annualized clip. At that rate, Vanguard's portion of the U.S. industry will cross 50% around 2035.

True, some competitors can now match or even undercut Vanguard on fees for broad market exposure. But Vanguard's burgeoning advice business could help it keep or even extend that lead. Through Digital Advisor and Personal Advisor Services, Vanguard has built an increasingly compelling ecosystem of advice for investors with simple to complex needs.

Vanguard is also using its advice business to expand overseas, but that's a work in progress. Of Vanguard's USD 7.6 trillion in global assets under management in March 2023, non-U.S. investors owned less than 10%, a figure that has changed little in recent years. Strategic shifts in China and other markets account for the slow pace, including returning money to institutions that had been layering on fees. Vanguard hopes to recoup that money and more by focusing on individual investors and the advisors who serve them. Provided Vanguard sticks to its playbook, its advantages should translate into success abroad, too.

High

Parent

Vanguard Russell 3000 ETF

VTHR tracks a market-cap-weighted index that measures the investable US equity space, covering the entire market-cap spectrum including micro-caps.

The fund tracks a market-cap-weighted index that measures the investable US equity space, covering the entire market-cap spectrum including micro-caps.

iShares Russell 1000 ETF

The new indexes will track corporate bonds.

Russell Expands Fixed Income Index Offerings

iShares Russell 1000 Value ETF

iShares Russell 1000 Growth ETF

iShares Russell 2000 ETF

iShares Russell 3000 ETF

Direxion Daily Small Cap Bull 3x Shares

Vanguard Russell 1000 ETF

Vanguard Russell 2000 ETF

Russell's annual reconstitution event has a significant impact on $364 billion in ETF assets.

How Russell Rebalance Impacts ETFs

There are two main ETFs that track the Russell 3000: IWV and VTHR.

Passive Russell 3000 ETFs: IWV Vs. VTHR

Avantis US Equity ETF

ClearBridge All Cap Growth ETF

iShares Focused Value Factor ETF

iShares Core S&P U.S. Growth ETF

iShares Core S&P US Value ETF

SPDR Portfolio Total Stock Market ETF

Solitary Pursuit Stocks Stand Out From The Crowd

WisdomTree U.S. Earnings 500 Fund

Fidelity MSCI Information Technology Index ETF

iShares Core MSCI Europe ETF

SPDR Portfolio S&P 500 Value ETF

Vanguard Mid-Cap ETF

Not all cheap ETFs are winners, but this bunch contains some gems that investors may want to embrace before the end of 2019.

News for Vanguard Russell 3000 ETF ETF (VTHR)