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Designed to provide broad exposure to the Small Cap Value segment of the US equity market, the Vanguard S&P Small-Cap 600 Value ETF (VIOV) is a passively managed exchange traded fund launched on 09/09/2010.

The fund is sponsored by Vanguard. It has amassed assets over $1.34 billion, making it one of the average sized ETFs attempting to match the Small Cap Value segment of the US equity market.

Why Small Cap Value

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.

Carrying lower than average price-to-earnings and price-to-book ratios, value stocks also have lower than average sales and earnings growth rates. Considering long-term performance, value stocks have outperformed growth stocks in almost all markets; however, they are more likely to underperform growth stocks in strong bull markets.

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 0.15%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 2.28%.

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 Consumer Discretionary sector--about 21.20% of the portfolio. Financials and Industrials round out the top three.

Looking at individual holdings, Meritage Homes Corp (MTH) accounts for about 0.97% of total assets, followed by Dxc Technology Co (DXC) and Insight Enterprises Inc (NSIT).

The top 10 holdings account for about 7.79% of total assets under management.

Performance and Risk

VIOV seeks to match the performance of the S&P SmallCap 600 Value Index before fees and expenses. The S&P SmallCap 600 Value Index represents the value companies of the S&P SmallCap 600 Index.

The ETF has lost about -4.52% so far this year and is down about -1.54% in the last one year (as of 02/12/2024). In the past 52-week period, it has traded between $70.88 and $89.92.

The ETF has a beta of 1.19 and standard deviation of 22.52% for the trailing three-year period, making it a medium risk choice in the space. With about 466 holdings, it effectively diversifies company-specific risk.

Alternatives

Vanguard S&P Small-Cap 600 Value ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, VIOV is a great option for investors seeking exposure to the Style Box - Small Cap Value segment of the market. There are other additional ETFs in the space that investors could consider as well.

The iShares Russell 2000 Value ETF (IWN) and the Vanguard Small-Cap Value ETF (VBR) track a similar index. While iShares Russell 2000 Value ETF has $11.82 billion in assets, Vanguard Small-Cap Value ETF has $26.63 billion. IWN has an expense ratio of 0.24% and VBR charges 0.07%.

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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.