Vanguard’s Russell 2000 ETF (VTWO) and the iShares Future AI and Tech ETF (ARTY) both target long-term growth, but they do so from fundamentally different angles.
One provides broad exposure to the small-cap segment of the U.S. market, while the other concentrates on a rapidly evolving technological frontier.
Understanding how each fund is constructed, how it performs, and what risks it carries is essential for investors allocating capital toward 2026 and beyond.
VTWO tracks the Russell 2000 Index, a benchmark representing nearly two thousand U.S. small-cap companies.
With 1,992 holdings, the ETF is inherently diversified both across companies and sectors. Approximately 20% of its weight is allocated to the industrials sector, but no single industry dominates the portfolio.
This design reduces idiosyncratic risk and allows investors to participate in broad-based small-cap growth.
Small-cap companies, generally valued between $300 million and $2 billion in market capitalization, have historically exhibited higher growth potential than their large-cap counterparts.
While not all emerging firms mature into category leaders, exposure to a wide set of them increases the probability of capturing outsized winners.
Performance history is one of VTWO’s notable strengths. Over the past decade, it has delivered an annualized return of 9.18%. When applied to a systematic contribution strategy, such as investing $200 per month, this return profile compounds meaningfully.
At a stable 9.18% rate, an investor could accumulate roughly $209,000 over 25 years. This illustrates the ETF’s appeal to long-term investors seeking scalable exposure to the small-cap segment without stock-picking complexity.
Also See: The One ETF You Can Buy Today and Hold Forever – No Matter What the Market Does
By contrast, ARTY concentrates on a narrow but high-potential sector: artificial intelligence and related technologies.
Rather than broad diversification, it offers thematic exposure to companies advancing AI software, infrastructure, and services across both U.S. and international markets.
Its portfolio contains only 48 holdings, a structure that increases concentration risk but also amplifies the impact of substantial upside within the theme.
ARTY carries several characteristics associated with higher volatility. First, its limited number of holdings makes performance more sensitive to individual company outcomes.
Second, the AI sector itself is inherently unstable, driven by rapid innovation cycles, shifting regulatory conditions, and unpredictable capital flows.
Third, ARTY is relatively young, having launched in 2018, and therefore lacks the long-term track record that many investors use to anchor expectations.
Performance has also been mixed. Over the past five years, ARTY has returned an average of 8.07% annually, trailing VTWO on a long-horizon basis.
However, its recent performance signals the sector’s explosive potential. Over the last 12 months, ARTY has generated a striking 33.77% return, underscoring how quickly AI-aligned companies can reprice when demand accelerates or breakthrough technologies emerge.
Investors considering ARTY must be prepared for elevated volatility in pursuit of higher thematic upside.
Comparing the two funds, VTWO is the more conventional growth vehicle. It offers extensive diversification, a long performance record, and exposure to companies positioned for organic growth across the U.S. economy.
It aligns well with investors seeking steady, compounding returns with moderated risk. ARTY, on the other hand, functions as a tactical satellite holding.
Its objective is not to mimic market behavior but to provide targeted access to a transformative technological domain.
For investors with higher risk tolerance and interest in AI’s long-run value creation, ARTY offers unique exposure unavailable in broad-market funds.
In constructing a growth-oriented portfolio, the two ETFs can serve complementary roles. VTWO can anchor the small-cap allocation with stability and breadth, while ARTY can deliver asymmetric upside tied to AI’s maturation.
Allocating between them depends on risk appetite, time horizon, and conviction in AI’s secular trajectory.
