Exploring the Vanguard S&P Small-Cap 600 Value ETF (VIOV): An Investment Worth Watching

The Vanguard S&P Small-Cap 600 Value ETF (VIOV - Free Report) is designed to give investors broad exposure to the small cap value segment of the U.S. equity market and was launched on September 9, 2010. As a passively managed exchange-traded fund, it's sponsored by Vanguard and has accumulated over $1.42 billion in assets. This makes it a competitive option among ETFs that focus on the small cap value area.

Understanding Small Cap Value

Investing in small cap companies, which generally have market capitalizations below $2 billion, comes with higher potential rewards, but also with increased risks. Typically, value stocks, including small caps, boast lower price-to-earnings and price-to-book ratios compared to their growth-oriented counterparts. While value stocks tend to outperform growth stocks over the long run in various market conditions, growth stocks might lead during strong bull markets.

Cost Considerations

When evaluating an ETF, one of the crucial aspects is its expense ratio, as it affects the overall returns. The VIOV has an impressive annual operating expense ratio of just 0.15%, placing it among the more cost-effective ETFs available today. Furthermore, it offers a 12-month trailing dividend yield of 1.26%, adding further appeal for income-focused investors.

Sector Allocation and Key Holdings

Before committing to an ETF, it's essential to scrutinize its underlying holdings. Transparency is a significant advantage of ETFs, as they usually disclose their holdings daily. For VIOV, the largest sector allocation is in Financials, which constitutes about 27.70% of its portfolio. The top three sectors also include Industrials and Consumer Discretionary.

Among the individual holdings, Comerica Inc (CMA - Free Report) comprises approximately 1.13% of total assets, alongside other notable companies like Slcmt1142 and Lumen Technologies Inc (LUMN - Free Report). Together, the top 10 holdings represent around 8.02% of the total assets managed by the ETF.

Performance and Risk Profile

The investment objective of VIOV is to match the performance of the S&P SmallCap 600 Value Index, tracking the performance of value-focused companies within the S&P SmallCap 600 Index. As of December 23, 2024, the ETF has reported a return of approximately 7.48% year-to-date and an impressive increase of about 10.99% over the past year. Throughout the last 52 weeks, it has fluctuated between a low of $80.92 and a high of $101.38.

With a beta of 1.17 and a standard deviation of 21.94% over the trailing three years, VIOV can be classified as a medium-risk investment. With around 465 holdings, it effectively mitigates the risk associated with individual stocks.

Alternative Investment Options

Vanguard S&P Small-Cap 600 Value ETF carries a Zacks ETF Rank of 2 (Buy), indicating strong potential based on various factors such as expected returns and momentum. For those looking for exposure to small cap value investments, VIOV stands out as an excellent choice. Additionally, investors might also explore alternatives like the Avantis U.S. Small Cap Value ETF (AVUV - Free Report) and the Vanguard Small-Cap Value ETF (VBR - Free Report). AVUV manages $15.06 billion in assets and carries an expense ratio of 0.25%, while VBR ranks higher with assets totaling $30.98 billion and an expense ratio of only 0.07%.

Final Thoughts

Many retail and institutional investors are increasingly gravitating toward passively managed ETFs due to their low costs, transparency, ease of trading, and tax efficiency. These characteristics make them excellent investment vehicles for long-term growth.

For those interested in exploring more about the Vanguard S&P Small-Cap 600 Value ETF and additional ETFs, it's advisable to screen for products that align with personal investment goals and stay updated with the latest developments in the ETF landscape.

ETF, Investment, Value