Should Vanguard SmallCap Growth ETF (VBK) Be on Your Investing Radar?

Designed to provide broad exposure to the Small Cap Growth segment of the US equity market, the Vanguard SmallCap Growth ETF (VBK) is a passively managed exchange traded fund launched on 01/26/2004.

The fund is sponsored by Vanguard. It has amassed assets over $11.71 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. Additionally, growth stocks have a greater level of risk associated with them. Even though growth stocks are more likely to outperform their value counterparts in strong bull markets, value stocks have a record of delivering better returns in almost all markets than growth stocks.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

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 0.50%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Information Technology sector--about 23.10% of the portfolio. Healthcare and Industrials round out the top three.

Looking at individual holdings, Slcmt1142 accounts for about 2.45% of total assets, followed by Entegris Inc. (ENTG) and Bio-Techne Corp. (TECH).

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 lost about -28.81% so far this year and is down about -33.54% in the last one year (as of 11/07/2022). In the past 52-week period, it has traded between $188.16 and $305.79.

The ETF has a beta of 1.13 and standard deviation of 30.16% for the trailing three-year period, making it a medium risk choice in the space. With about 712 holdings, it effectively diversifies company-specific risk.

Alternatives

Vanguard SmallCap Growth 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, VBK is a sufficient option for those seeking exposure to the Style Box - Small Cap Growth area of the market. Investors might also want to consider some other ETF options in the space.

The iShares S&P SmallCap 600 Growth ETF (IJT) and the iShares Russell 2000 Growth ETF (IWO) track a similar index. While iShares S&P SmallCap 600 Growth ETF has $5.04 billion in assets, iShares Russell 2000 Growth ETF has $9.35 billion. IJT has an expense ratio of 0.18% and IWO charges 0.23%.

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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Vanguard SmallCap Growth ETF (VBK): ETF Research Reports
 
Entegris, Inc. (ENTG) : Free Stock Analysis Report
 
BioTechne Corp (TECH) : Free Stock Analysis Report
 
iShares Russell 2000 Growth ETF (IWO): ETF Research Reports
 
iShares S&P SmallCap 600 Growth ETF (IJT): ETF Research Reports
 
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