One of the best ways to turn a handsome profit through U.S. stocks during the past year has been through an exchange-traded fund (ETF) that invests in the Russell 2000. The iShares Russell 2000 Index Fund (IWM) has risen an impressive 22.15% this year through December 14, 2010. That powerful gain reflects the tendency for smaller public companies, also known as small-cap stocks, to outperform bigger and better-known corporations.

The upward trajectory of IWM indicates to me that the fund is likely to keep climbing. Although there’s always a chance of a pullback, signs that the U.S. economy is improving are making me take a closer look at IWM as an opportunity to seize upon any short-term retreat in stock prices.

IWM seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the small capitalization sector of the U.S. equity market as represented by the Russell 2000 Index. The capitalization-weighted index tracks the approximately 2,000 smallest companies in the Russell 3000 Index.

Past performance never is a guarantee of future returns, but small-cap stocks certainly have been on the ascent and outperforming the corporate behemoths that compose the Dow Jones Industrials, as well as the large companies that form the S&P 500 index. As the chart below shows, IWM has been soaring.

Another reason why I like IWM is that I have invested profitably in it in the past. I recommended the fund to subscribers of my Successful Investing newsletter between June 1, 2009, and October 28, 2009, and that position produced a profit of 10.58%. Anytime an investor can produce a double-digit percentage gain in less than five months, he or she has done something special. For me, the satisfaction comes from helping my subscribers. I especially appreciate the kind notes of thanks that I sometimes receive for helping them to achieve their financial goals. It is at times such as the holiday season that I reflect on our past successes and look for ways to expand upon them in the coming year. IWM could be one such opportunity.

For advice about which ETFs to buy and to sell, I urge you to sign up for my ETF Trader service by clicking here. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to contact me if you have one. To send me a question, simply click here. You may just see your question answered in a future ETF Talk.