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Should Vanguard Small-Cap Growth ETF (VBK) Be on Your Investing Radar?

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Looking for broad exposure to the Small Cap Growth segment of the US equity market? You should consider the Vanguard Small-Cap Growth ETF (VBK - Free Report) , a passively managed exchange traded fund launched on 01/26/2004.

The fund is sponsored by Vanguard. It has amassed assets over $16.68 billion, making it the largest ETFs attempting to match the Small Cap Growth segment of the US equity market.

Why Small Cap Growth

With more potential comes more risk, and small cap companies, with market capitalization below $2 billion, epitomizes this way of thinking.

Qualities of growth stocks include faster growth rates compared to the broader market, as well as higher valuations and higher than average sales and earnings growth rates. Also, growth stocks are a type of equity that carries more risk compared to others. When you consider growth versus value, growth stocks are usually the clear winner in strong bull markets but tend to fall flat in nearly all other environments.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.07%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 0.69%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Information Technology sector--about 23.20% of the portfolio. Industrials and Healthcare round out the top three.

Looking at individual holdings, Slcmt1142 accounts for about 1.69% of total assets, followed by Super Micro Computer Inc (SMCI - Free Report) and Vertiv Holdings Co (VRT - Free Report) .

The top 10 holdings account for about 10.1% of total assets under management.

Performance and Risk

VBK seeks to match the performance of the CRSP U.S. Small Cap Growth Index before fees and expenses. The CRSP U.S. Small Cap Growth Index measures the investment return of small-capitalization growth stocks.

The ETF has added roughly 3.29% so far this year and is up about 16.97% in the last one year (as of 05/30/2024). In the past 52-week period, it has traded between $196.36 and $260.72.

The ETF has a beta of 1.14 and standard deviation of 24.13% for the trailing three-year period, making it a medium risk choice in the space. With about 644 holdings, it effectively diversifies company-specific risk.

Alternatives

Vanguard Small-Cap Growth 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, VBK is an excellent option for investors seeking exposure to the Style Box - Small Cap Growth segment of the market. There are other additional ETFs in the space that investors could consider as well.

The iShares S&P Small-Cap 600 Growth ETF (IJT - Free Report) and the iShares Russell 2000 Growth ETF (IWO - Free Report) track a similar index. While iShares S&P Small-Cap 600 Growth ETF has $5.82 billion in assets, iShares Russell 2000 Growth ETF has $10.87 billion. IJT has an expense ratio of 0.18% and IWO charges 0.24%.

Bottom-Line

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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