Better Small-Cap Growth ETF: Vanguard's VBK vs. State Street's SLYG

The State Street SPDR S&P 600 Small Cap Growth ETF (NYSEMKT:SLYG) and the Vanguard Small-Cap Growth ETF (NYSEMKT:VBK) both target U.S. small-cap growth stocks, but VBK charges a lower fee, is far larger by assets under management, and shows a stronger recent performance record alongside higher volatility.

Both SLYG and VBK are designed to capture the upside of U.S. small-cap growth companies, though they track different benchmarks and use distinct selection criteria.

This comparison explores how their costs, returns, risk profiles, and portfolio tilts stack up for investors seeking exposure to fast-growing smaller firms.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns. The 1-yr return represents total return over the trailing 12 months.

VBK looks more affordable, charging less than half the expense ratio of SLYG, though SLYG offers a slightly higher dividend yield over the past year.

Performance & risk comparison

What's inside

VBK tracks a broad basket of 579 U.S. small-cap growth stocks, with technology (27%), industrials (21%), and healthcare (18%) as its largest sector allocations. Its top holdings as of the latest data include Insmed Inc (NASDAQ:INSM), Comfort Systems USA Inc (NYSE:FIX), and SoFi Technologies Inc (NASDAQ:SOFI), each representing a little over 1% of the fund. The fund has a long track record of 22 years, and its sector allocation shows a pronounced tilt toward technology relative to its peer.

SLYG, in contrast, covers 336 stocks and places slightly less weight on technology (19%), with industrials (18%), and healthcare (16%) close behind. Its largest positions include Arrowhead Pharmaceuticals In (NASDAQ:ARWR), Armstrong World Industries (NYSE:AWI), and Jbt Marel Corp (NYSE:JBTM).

Both funds avoid leverage, currency hedges, or ESG overlays, so investors should expect straightforward exposure to small-cap growth factors. SLYG’s selection process emphasizes sales growth and momentum, while VBK’s approach results in broader diversification and a heavier tech exposure.

For more guidance on ETF investing, check out the full guide at this link.

What this means for investors

Both the State Street SPDR S&P 600 Small Cap Growth ETF (SLYG) and the Vanguard Small-Cap Growth ETF (VBK) provide good exposure to smaller growth companies, so choosing one to invest in comes down to a handful of key differences.

Because VBK has a greater emphasis on technology stocks, it exhibits higher volatility. This can be seen in its bigger beta and max drawdown compared to SLYG. However, the fund sports a much lower expense ratio, which keeps more money in your pocket. Moreover, its far larger assets under management provide the fund with greater liquidity for investors.

SLYG's smaller exposure to the tech industry contributed to its lower one-year return compared to VBK due to the sector's rapid growth from the rise of artificial intelligence. However, this means SLYG is not as exposed to the higher volatility inherent in the technology market. Moreover, stocks such as Arrowhead Pharmaceuticals have seen substantial gains over the past year, so SLYG can still deliver strong results without as much invested in tech companies.

In choosing between these two ETFs, SLYG's major downsides are its smaller AUM and higher expense ratio. For investors who care about liquidity and cost, VBK would be the superior ETF. For those who want lower volatility, SLYG is the better choice.

Glossary

ETF: Exchange-traded fund that holds a basket of securities and trades like a stock.
Expense ratio: Annual fund fee, expressed as a percentage of assets, deducted from returns.
Assets under management (AUM): Total market value of all assets managed by a fund.
Small-cap: Companies with relatively small stock market values, typically a few hundred million to several billion dollars.
Growth stocks: Companies expected to grow earnings or revenue faster than the overall market.
Benchmark: A standard index used to measure a fund’s performance and guide its holdings.
Dividend yield: Annual dividends per share divided by share price, showing income return percentage.
Total return: Investment gain including price changes plus dividends, assuming dividends are reinvested.
Beta: Measure of a security’s volatility relative to the overall market, often the S&P 500.
Max drawdown: Largest peak-to-trough decline in value over a specific period.
Sector allocation: How a fund’s investments are distributed across different industries or sectors.
Diversification: Spreading investments across many securities to reduce the impact of any single holding.

Robert Izquierdo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Comfort Systems USA and Vanguard Index Funds - Vanguard Small-Cap Growth ETF. The Motley Fool has a disclosure policy.