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 designed to give investors a wide reach into the Small Cap Value portion of the US equity market. This passively managed exchange-traded fund was launched on September 9, 2010, by Vanguard.

With over $1.42 billion in assets, VIOV is considered a moderately sized ETF that focuses on replicating the performance of the Small Cap Value category.

Why Consider Small Cap Value?

Investing in small cap companies can be a mixed bag of potential and risk. These companies generally have market capitalizations of less than $2 billion. Small cap stocks tend to have lower price-to-earnings and price-to-book ratios, which can be appealing to value investors.

Although historically, value stocks tend to outperform growth stocks over the long run, growth stocks often excel in buoyant market conditions.

Cost Considerations

Expense ratios significantly influence an ETF's total return. Lower-cost funds can lead to better performance over time when compared to more expensive options. The annual operating expenses for VIOV stand at a low 0.15%, positioning it among the most cost-effective ETFs in its category.

The ETF also features a 12-month trailing dividend yield of 1.26%. This combination of low costs and decent yields makes it attractive to investors.

Sector Breakdown and Major Holdings

Before investing in any ETF, it's essential to examine its holdings, which can provide valuable insight into sector exposure and individual stock risks. VIOV primarily invests in the Financials sector, which makes up approximately 27.70% of the portfolio. Other significant sectors include Industrials and Consumer Discretionary.

Among its top holdings, Comerica Inc (CMA - Free Report) represents about 1.13% of the ETF, along with significant stakes in companies like Lumen Technologies Inc (LUMN - Free Report). In total, the top 10 holdings comprise roughly 8.02% of the fund's total assets.

Performance and Risk Assessment

VIOV aims to track the performance of the S&P SmallCap 600 Value Index ahead of fees & expenses. So far this year, the ETF has generated returns of around 7.48%, with an annual increase of approximately 10.99% based on data from December 23, 2024. Over the past year, VIOV's price has fluctuated between $80.92 and $101.38.

The ETF carries a beta of 1.17 and has a standard deviation of 21.94% over a three-year period, making it a medium-risk investment. Its diverse holdings, totaling around 465 companies, help in managing risks associated with individual stocks.

Exploring Alternatives

The Vanguard S&P Small-Cap 600 Value ETF is rated a Zacks ETF Rank of 2 (Buy). This rating considers factors like expected asset class return, expense ratio, and momentum. As a result, VIOV is a solid option for investors looking for exposure to the Small Cap Value segment.

For those interested in other ETFs, options like the Avantis U.S. Small Cap Value ETF (AVUV - Free Report) and the Vanguard Small-Cap Value ETF (VBR - Free Report) also provide similar exposure in this space. The Avantis fund boasts $15.06 billion in assets, while Vanguard's Small-Cap Value ETF has even more at $30.98 billion. Moreover, AVUV has an expense ratio of 0.25%, whereas VBR charges only 0.07%.

Final Thoughts

In recent years, many investors, both retail and institutional, have turned to passively managed ETFs due to their low costs, transparency, flexibility, and tax efficiency. These funds serve as excellent long-term investment vehicles.

To explore VIOV or other ETFs based on your investment goals, consider researching and comparing various offerings to align with your financial strategies.

ETFs, Investing, Performance