Should Vanguard S&P Small-Cap 600 Value ETF (VIOV) Be on Your Investing Radar?

The Vanguard S&P Small-Cap 600 Value ETF (VIOV - Free Report) is an exchange-traded fund designed to offer broad exposure to the Small Cap Value segment of the US equity market. This fund was launched on September 9, 2010, and is sponsored by Vanguard, a well-known name in the investment world. VIOV has successfully gathered assets exceeding $1.42 billion, positioning it as one of the more moderately sized ETFs focused on small-cap value stocks.

Understanding Small Cap Value

Investing in small-cap companies, which are defined as those with market capitalizations under $2 billion, brings both potential rewards and risks. Generally, small-cap stocks tend to have lower price-to-earnings and price-to-book ratios compared to their larger counterparts. However, they typically experience lower sales and earnings growth rates as well.

Data shows that value stocks have outperformed growth stocks over extended periods in various market conditions. Nevertheless, during strong bullish markets, growth stocks might see a more favorable performance compared to value stocks.

Cost Effectiveness

When evaluating an ETF's total return, it's crucial to look at its expense ratio. Lower expense ratios can lead to better long-term investment returns compared to more expensive options when other factors are similar. The Vanguard S&P Small-Cap 600 Value ETF boasts a low annual expense ratio of 0.15%, making it one of the more affordable options in its category.

This ETF also has a trailing dividend yield of 1.26% over the last 12 months, adding to its appeal for income-focused investors.

Sector Breakdown and Key Holdings

Before committing to an ETF, it's wise to understand its specific holdings despite the advantages of diverse exposure that ETFs offer, which can help mitigate individual stock risk. Most ETFs make their holdings transparent, revealing them daily.

VIOV has its highest allocation in the Financials sector, making up approximately 27.70% of the portfolio. Furthermore, the Industrials and Consumer Discretionary sectors also comprise significant portions of the fund.

Among its top individual holdings, Comerica Inc (CMA - Free Report) represents around 1.13% of the total assets, followed by Slcmt1142 and Lumen Technologies Inc (LUMN - Free Report). In total, the ETF’s top 10 holdings account for about 8.02% of its overall assets.

Performance Metrics and Risks

The VIOV ETF aims to replicate the performance of the S&P SmallCap 600 Value Index, which specifically targets the value stocks within the S&P SmallCap 600 Index. As of December 23, 2024, the ETF has shown a return of approximately 7.48% year-to-date, and it has increased about 10.99% over the past year. Over the past 52 weeks, shares have traded within a range from $80.92 to $101.38.

The ETF’s beta is measured at 1.17, indicating a somewhat higher volatility level relative to the broader market. Its standard deviation stands at 21.94% over the past three years, suggesting it carries medium risk. With around 465 holdings, VIOV effectively diversifies against company-specific risks.

Exploring Alternatives

The Vanguard S&P Small-Cap 600 Value ETF holds a Zacks ETF Rank of 2 (Buy), highlighting its favorable expected returns based on various factors such as expense ratio and market momentum. This makes VIOV a strong candidate for investors looking to engage with the Small Cap Value style.

For those considering alternatives, other ETFs that also focus on small-cap value include the Avantis U.S. Small Cap Value ETF (AVUV - Free Report) and the Vanguard Small-Cap Value ETF (VBR - Free Report). The Avantis ETF has approximately $15.06 billion in assets, while the Vanguard Small-Cap Value ETF manages around $30.98 billion. Notably, AVUV charges an expense ratio of 0.25%, whereas VBR offers a lower expense ratio of 0.07%.

Conclusion

Both retail and institutional investors are increasingly showing a preference for passively managed ETFs due to their low costs, transparency, flexibility, and potential tax efficiency. These funds can serve as excellent investment vehicles for long-term financial goals.

For more information on this and other ETFs, consider exploring investment products that align with your personal objectives and staying informed on the latest trends within the ETF investing landscape.

ETF, Investing, Performance