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) is an exchange-traded fund designed to provide comprehensive exposure to the Small Cap Value segment of the U.S. equity market. Launched on September 9, 2010, this passively managed ETF is backed by Vanguard and has gathered assets exceeding $1.42 billion, placing it among the average-sized ETFs in the Small Cap Value category.

Why Small Cap Value?

Investing in small cap companies, which are those with a market capitalization of less than $2 billion, presents both opportunities and risks. These companies tend to have lower price-to-earnings and price-to-book ratios. Generally, while value stocks have demonstrated better long-term performance compared to growth stocks, growth stocks can outperform during strong bull markets.

Costs

Expense ratios play a crucial role in determining an ETF's total return. Lower-cost funds can yield significantly better returns over the long term, assuming other variables remain constant. VIOV boasts an annual operating expense ratio of just 0.15%, making it one of the most cost-effective options available. It also offers a 12-month trailing dividend yield of 1.26%.

Sector Exposure and Top Holdings

Before investing in an ETF, it is essential to review its holdings thoroughly. This ETF's portfolio is heavily weighted in the Financials sector, which comprises approximately 27.70% of its assets. Other significant sectors include Industrials and Consumer Discretionary.

Among its top holdings, Comerica Inc (CMA) constitutes around 1.13% of total assets, following investments in Slcmt1142 and Lumen Technologies Inc (LUMN). The top ten holdings together account for about 8.02% of the total assets under management, offering a diversified approach to risk mitigation.

Performance and Risk

The goal of VIOV is to replicate the performance of the S&P SmallCap 600 Value Index, which reflects the value-oriented companies within the S&P SmallCap 600 Index. So far this year, the ETF has returned approximately 7.48% and has gained about 10.99% over the past year (as of December 23, 2024). During the last 52 weeks, it has traded within a range of $80.92 to $101.38.

In terms of risk, VIOV has a beta of 1.17 and a standard deviation of 21.94% over the trailing three-year period, categorizing it as a medium-risk investment. With approximately 465 holdings, the ETF successfully reduces company-specific risks.

Alternatives

Vanguard S&P Small-Cap 600 Value ETF holds a Zacks ETF Rank of 2 (Buy), which is influenced by expected returns, expense ratios, and market momentum. This makes VIOV an appealing choice for investors interested in the Small Cap Value segment. Alternatives to consider include the Avantis U.S. Small Cap Value ETF (AVUV) and the Vanguard Small-Cap Value ETF (VBR), which track similar indices. Currently, AVUV manages $15.06 billion in assets while VBR has $30.98 billion, with expense ratios of 0.25% and 0.07%, respectively.

Bottom-Line

Both retail and institutional investors are increasingly gravitating towards passively managed ETFs, which offer transparency, low expenses, flexibility, and tax efficiency, making them effective for long-term investment strategies. To gain further insights into VIOV and other ETFs, investors should explore options that align with their financial objectives.

Investing, ETFs, Finance