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

The Vanguard S&P Small-Cap 600 Value ETF, known by its ticker symbol VIOV, was established to offer comprehensive exposure to the Small Cap Value category of the U.S. stock market. Launched on September 9, 2010, this ETF is managed passively, aiming to replicate the performance of the S&P SmallCap 600 Value Index.

With over $1.42 billion in assets, VIOV is considered an average-sized ETF focused on the Small Cap Value segment. The fund is sponsored by Vanguard, a respected name in the investment world.

Why Small Cap Value?

Investing in small cap companies, which have market capitalizations below $2 billion, carries both opportunities and risks. These companies typically present lower price-to-earnings (P/E) and price-to-book (P/B) ratios compared to larger firms. However, one should note that value stocks, although historically outperforming growth stocks in the long term, may lag during robust bull markets.

Costs

When analyzing an ETF’s potential total returns, the expense ratio is a crucial element. Lower-cost funds can outperform their pricier counterparts over time, provided other aspects remain similar. VIOV boasts a competitive annual operating expense of 0.15%, making it one of the more affordable options in this investment landscape. Additionally, it offers a 12-month trailing dividend yield of 1.26%.

Sector Exposure and Top Holdings

Understanding an ETF’s holdings is vital before making an investment decision. Despite the inherent diversification benefits of ETFs, which help reduce stock-specific risks, it’s essential to investigate what’s inside them. VIOV predominantly allocates around 27.70% of its portfolio to the Financials sector, with Industrials and Consumer Discretionary sectors following suit. Notably, individual holdings like Comerica Inc represent about 1.13% of the ETF's total assets, followed closely by other companies such as Slcmt1142 and Lumen Technologies Inc. Moreover, the top ten holdings amount to approximately 8.02% of the total assets under management.

Performance and Risk

VIOV aims to mirror the performance of the S&P SmallCap 600 Value Index before accounting for fees and expenses. This ETF has a return of around 7.48% year-to-date and has increased about 10.99% over the past year (as of December 23, 2024). In the last 52 weeks, VIOV’s stock price has fluctuated between $80.92 and $101.38.

With a beta value of 1.17 and a standard deviation of 21.94% over the past three years, VIOV is regarded as a medium-risk investment option. Comprising approximately 465 different holdings, the ETF effectively mitigates risks tied to individual companies.

Alternatives

The Vanguard S&P Small-Cap 600 Value ETF earns a Zacks ETF Rank of 2 (Buy) based on factors such as anticipated asset class returns, expense ratio, and momentum. For investors looking to tap into the Small Cap Value market, VIOV represents a solid choice. However, there are alternative ETFs worth considering, like the Avantis U.S. Small Cap Value ETF (AVUV), which has $15.06 billion in assets, and the Vanguard Small-Cap Value ETF (VBR) with $30.98 billion in assets. It’s important to note that AVUV has an expense ratio of 0.25%, whereas VBR’s expense ratio is even lower at 0.07%.

Bottom Line

In recent years, both retail and institutional investors have increasingly favored passively managed ETFs for their cost-effectiveness, transparency, flexibility, and tax efficiency. These investment vehicles are particularly well-suited for long-term investors looking to build wealth.

To further explore this ETF and others like it, consider screening for products that align with your investment goals and reading about the latest news in the ETF investment space.

ETF, Investing, Stocks