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Should Vanguard S&P SmallCap 600 ETF (VIOO) Be on Your Investing Radar?

Zacks Equity Research
·3 min read

The Vanguard S&P SmallCap 600 ETF (VIOO) was launched on 09/09/2010, and is a passively managed exchange traded fund designed to offer broad exposure to the Small Cap Blend segment of the US equity market.

The fund is sponsored by Vanguard. It has amassed assets over $1.85 billion, making it one of the larger ETFs attempting to match the Small Cap Blend segment of the US equity market.

Why Small Cap Blend

Small cap companies have market capitalization below $2 billion. They usually have higher potential than large and mid cap companies with stocks but higher risk.

Typically holding a combination of both growth and value stocks, blend ETFs also demonstrate qualities seen in value and growth investments.

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Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.10%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.49%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Financials sector--about 20.10% of the portfolio. Industrials and Information Technology round out the top three.

Looking at individual holdings, Agree Realty Corp. (ADC) accounts for about 0.64% of total assets, followed by Ufp Industries Inc. (UFPI) and Exlservice Holdings Inc. (EXLS).

The top 10 holdings account for about 5.59% of total assets under management.

Performance and Risk

VIOO seeks to match the performance of the S&P SmallCap 600 Index before fees and expenses. The S&P SmallCap 600 Index represents the small-cap segment of the U.S. equity market.

The ETF has lost about -22.97% so far this year and is down about -18.53% in the last one year (as of 09/26/2022). In the past 52-week period, it has traded between $163.55 and $222.02.

The ETF has a beta of 1.13 and standard deviation of 30.60% for the trailing three-year period, making it a medium risk choice in the space. With about 605 holdings, it effectively diversifies company-specific risk.

Alternatives

Vanguard S&P SmallCap 600 ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, VIOO is a good option for those seeking exposure to the Style Box - Small Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell 2000 ETF (IWM) and the iShares Core S&P SmallCap ETF (IJR) track a similar index. While iShares Russell 2000 ETF has $48.40 billion in assets, iShares Core S&P SmallCap ETF has $60.16 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are 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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Vanguard S&P SmallCap 600 ETF (VIOO): ETF Research Reports
 
UFP Industries, Inc. (UFPI) : Free Stock Analysis Report
 
ExlService Holdings, Inc. (EXLS) : Free Stock Analysis Report
 
Agree Realty Corporation (ADC) : Free Stock Analysis Report
 
iShares Russell 2000 ETF (IWM): ETF Research Reports
 
iShares Core S&P SmallCap ETF (IJR): ETF Research Reports
 
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Zacks Investment Research