Should Vanguard SmallCap ETF (VB) Be on Your Investing Radar?

38 09/07/2022

Designed to provide broad exposure to the Small Cap Blend segment of the US equity market, the Vanguard SmallCap ETF (VB) is a passively managed exchange traded fund launched on 01/26/2004.

The fund is sponsored by Vanguard. It has amassed assets over $42.96 billion, making it one of the largest ETFs attempting to match the Small Cap Blend segment of the US equity market.

Why Small Cap Blend

With more potential comes more risk, and small cap companies, with market capitalization below $2 billion, epitomizes this way of thinking.

Blend ETFs usually hold a mix of growth and value stocks as well as stocks that exhibit both value and growth characteristics.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.05%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.45%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

Should Vanguard SmallCap ETF (VB) Be on Your Investing Radar?

Looking at individual holdings, Diamondback Energy Inc. (FANG) accounts for about 0.44% of total assets, followed by Vici Properties Inc. (VICI) and Coterra Energy Inc.

Performance and Risk

VB seeks to match the performance of the CRSP US Small Cap Index before fees and expenses. The CRSP US Small Cap Index includes U.S. companies that fall between the bottom 2%-15% of the investable market capitalization. There is no lower limit in market capitalization. The index includes securities traded on NYSE, NYSE Market, NASDAQ or ARCA.

The ETF has lost about -15.15% so far this year and is down about -11.01% in the last one year (as of 05/18/2022). In the past 52-week period, it has traded between $180.06 and $239.37.

The ETF has a beta of 1.14 and standard deviation of 27.54% for the trailing three-year period, making it a medium risk choice in the space. With about 1546 holdings, it effectively diversifies company-specific risk.

Alternatives

Vanguard SmallCap ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, VB is a great option for investors seeking exposure to the Style Box - Small Cap Blend segment of the market. There are other additional ETFs in the space that investors could consider as well.

The iShares Russell 2000 ETF (IWM) and the iShares Core S&P SmallCap ETF (IJR) track a similar index. While iShares Russell 2000 ETF has $54.49 billion in assets, iShares Core S&P SmallCap ETF has $66.24 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.

Bottom-Line

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.


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Vanguard SmallCap ETF (VB): ETF Research Reports

iShares Russell 2000 ETF (IWM): ETF Research Reports

Diamondback Energy, Inc. (FANG): Free Stock Analysis Report

iShares Core S&P SmallCap ETF (IJR): ETF Research Reports

VICI Properties Inc. (VICI): Free Stock Analysis Report

To read this article on Zacks.com click here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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