What is the best performing small cap value ETF?
Are small-cap ETFs a good investment? Investing in small-cap ETFs can provide attractive returns as long as they're purchased at sensible prices, but there are some drawbacks to be aware of. Small-cap ETFs allow you to purchase a diversified portfolio of smaller companies for a relatively low cost.
| Ticker | Fund | Expense Ratio |
|---|---|---|
| AVUV | Avantis U.S. Small Cap Value ETF | 0.25% |
| RZV | Invesco S&P SmallCap 600 Pure Value ETF | 0.35% |
| DEEP | Roundhill Acquirers Deep Value ETF | 0.80% |
| XSVM | Invesco S&P SmallCap Value with Momentum ETF | 0.39% |
- iShares Morningstar Small-Cap Growth ETF.
- Vanguard Small-Cap Growth ETF.
- Vanguard S&P Small-Cap 600 Growth ETF.
- Vanguard Russell 2000 Growth ETF.
- iShares S&P Small-Cap 600 Growth ETF.
- SPDR® S&P 600 Small Cap Growth ETF.
- iShares Russell 2000 Growth ETF.
Are small-cap ETFs a good investment? Investing in small-cap ETFs can provide attractive returns as long as they're purchased at sensible prices, but there are some drawbacks to be aware of. Small-cap ETFs allow you to purchase a diversified portfolio of smaller companies for a relatively low cost.
| Symbol Symbol | ETF Name ETF Name | % In Top 10 % In Top 10 |
|---|---|---|
| VIOO | Vanguard S&P Small-Cap 600 ETF | 5.81% |
| VIOV | Vanguard S&P Small-Cap 600 Value ETF | 8.38% |
| VTWG | Vanguard Russell 2000 Growth ETF | 11.60% |
| VIOG | Vanguard S&P Small-Cap 600 Growth ETF | 10.50% |
Not only have small-cap stocks historically outperformed their larger peers, but they've done so strongly, by an annual average of more than 300 basis points (bps), and consistently, more than 69% of the time (Figure 1).
According to Lee's analysis, small caps are trading for the lowest price-to-book valuation relative to the S&P 500 in a quarter-century. The last time this valuation gap was seen was 1999, and small caps outperformed the S&P 500 for the next 12 years.
VBR - Vanguard Small-Cap Value ETF.
Key Morningstar Metrics for Vanguard Small-Cap Value ETF
Its broad diversification and razor-thin expense ratio make this one of the best small-cap value funds available. The fund tracks the CRSP US Small Cap Value Index, which captures the cheaper side of the small-cap market.
| Symbol | Name | 5-Year Return |
|---|---|---|
| IUS | Invesco RAFI Strategic US ETF | 14.75% |
| OEF | iShares S&P 100 ETF | 14.73% |
| SPHB | Invesco S&P 500® High Beta ETF | 14.58% |
| SPYG | SPDR Portfolio S&P 500 Growth ETF | 14.40% |
How risky are small-cap ETFs?
Some investors believe in what's called the “small-cap effect,” a theory that smaller companies have more room to grow than larger companies — and thus have more potential for a bigger return. Because smaller companies don't have as much financial wiggle room, they are often riskier than larger companies.
Both have the same expense ratio and similar dividend yield, so you should choose whichever one you prefer based on the fund's strategy. If you only want to own the biggest and safest companies, choose VOO. If you want broader exposure and more diversification, choose VTI.
Small-cap mutual funds perform well over a long period of time. However, over a short period of time, they tend to be very volatile. So if you plan on withdrawing/redeeming your money from the mutual fund early, you could suffer losses. Sure, you could also make gains, but there is always the risk.
The largest S&P Small Cap 600 Value ETF is the iShares S&P Small-Cap 600 Value ETF IJS with $6.68B in assets. In the last trailing year, the best-performing S&P Small Cap 600 Value ETF was VIOV at 4.58%.
Vanguard S&P 500 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, VOO is a great option for investors seeking exposure to the Style Box - Large Cap Blend segment of the market.
Their high level of diversification across geographies, sectors, styles, credit quality, maturities and market-cap sizes can help investors easily tailor a portfolio to their desired risk tolerance, time horizon and investment objective. Our pick for the best overall Vanguard ETF is Vanguard Total World Stock ETF.
Given the changing macroeconomic backdrop, we outline why we see potential value for investors in small caps in 2024. The consensus is that interest rates look to have peaked, with markets now pricing in cuts across many major economies in 2024, something which could prove beneficial to small caps.
If return expectations are reasonable then small cap funds may continue to do well, albeit with higher volatility,” says Padiyar. So investors should not expect a similar performance in the next two years, but relatively lower returns. Given the large opportunity, you should not abandon small cap funds alothether.
Investment view
The long-term advantages of a modest allocation to small-caps are often overlooked, including diversification and a potential boost to returns. In addition, on a tactical basis, small-caps appear well positioned to outperform as central banks cut rates.
What is the largest small-cap ETF?
The largest Small Cap ETF is the iShares Core S&P Small-Cap ETF IJR with $78.34B in assets. In the last trailing year, the best-performing Small Cap ETF was SMHB at 46.56%. The most recent ETF launched in the Small Cap space was the Invesco S&P SmallCap 600 GARP ETF GRPZ on 03/27/24.
You only need one S&P 500 ETF
You could be tempted to buy all three ETFs, but just one will do the trick. You won't get any additional diversification benefits (meaning the mix of various assets) because all three funds track the same 500 companies.
ETFs are bought and sold on an exchange throughout the day while mutual funds can be bought or sold only once a day at the latest closing price. Many online brokers offer commission-free ETFs regardless of the size of the account. Some mutual funds require a minimum initial investment.
The mutual fund operator has since become the second-largest provider of ETFs (by market cap) behind Blackrock.3 Vanguard's unique cost structure, the economies of scale it has achieved, and the total number of assets under management (AUM) allow it to offer its ETFs at the lowest cost available in the market.
- Vanguard Mid-Cap Growth ETF.
- iShares Morningstar Mid-Cap Growth ETF.
- Vanguard S&P Mid-Cap 400 Growth ETF.
- SPDR® S&P 400 Mid Cap Growth ETF.
- iShares S&P Mid-Cap 400 Growth ETF.
- iShares Russell Mid-Cap Growth ETF.
- Invesco NASDAQ Next Gen 100 ETF.
