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

If you're interested in broad exposure to the Small Cap Blend segment of the US equity market, look no further than the Vanguard S&P SmallCap 600 ETF (VIOO), a passively managed exchange traded fund launched on 09/09/2010.

The fund is sponsored by Vanguard. It has amassed assets over $2.21 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

There's a lot of potential to investing in small cap companies, but with market capitalization below $2 billion, that high potential comes with even higher risk.

Blend ETFs are aptly named, since they tend to hold a mix of growth and value stocks, as well as show characteristics of both kinds of equities.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

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 1.30%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. 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 19% 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 -11.83% so far this year and is down about -12.47% in the last one year (as of 11/28/2022). In the past 52-week period, it has traded between $161.22 and $213.98.

The ETF has a beta of 1.14 and standard deviation of 31.29% 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 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, VIOO is an excellent option for investors seeking exposure to the Style Box - Small Cap Blend segment of the market. There are other additional ETFs in the space that investors could consider as well.

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 $56.31 billion in assets, iShares Core S&P SmallCap ETF has $68.92 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.

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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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