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

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

The fund is sponsored by Vanguard. It has amassed assets over $16.10 billion, making it the largest ETFs attempting to match the Small Cap Growth segment of the US equity market.

Why Small Cap Growth

Sitting at a market capitalization below $2 billion, small cap companies tend to be high-potential stocks compared to its large and mid cap counterparts, but come with higher risk.

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. Something to keep in mind is the higher level of volatility that is affiliated with growth stocks. 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

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

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 0.36%.

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 Information Technology sector–about 25.70% of the portfolio. Healthcare and Industrials round out the top three.

Looking at individual holdings, Slcmt1142 accounts for about 1.39% of total assets, followed by Bio-Techne Corp. (TECH) and Entegris Inc. (ENTG).

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 added roughly 7.33% so far this year and it’s up approximately 4.84% in the last one year (as of 12/29/2021). In the past 52-week period, it has traded between $260.67 and $305.79.

The ETF has a beta of 1.14 and standard deviation of 26.15% for the trailing three-year period, making it a medium risk choice in the space. With about 713 holdings, it effectively diversifies company-specific risk.

Alternatives

Vanguard SmallCap Growth 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, VBK is a great option for investors seeking exposure to the Style Box – Small Cap Growth segment of the market. There are other additional ETFs in the space that investors could consider as well.

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 $6.32 billion in assets, iShares Russell 2000 Growth ETF has $12.34 billion. IJT has an expense ratio of 0.18% and IWO charges 0.24%.

Bottom-Line

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

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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