VB vs. SPSM Small-Cap Showdown: Maximum Reach or Strategic Focus?

State Street SPDR Portfolio S&P 600 Small Cap ETF (NYSEMKT:SPSM) and Vanguard Small-Cap ETF (NYSEMKT:VB) both target U.S. small-cap stocks, but VB covers a broader slice of the market, holds more companies, and posted higher one-year returns, while SPSM stands out for its lower expense ratio.

Both SPSM and VB offer low-cost, index-based access to U.S. small-cap equities, appealing to investors seeking diversified exposure beyond large caps. This comparison looks at costs, returns, portfolio makeup, and trading practicality to help investors decide which ETF best fits a small-cap allocation.

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.

SPSM is more affordable with a 0.03% expense ratio, while VB charges a slightly higher 0.05%. SPSM also offers a marginally higher dividend yield, which may appeal to those seeking a bit more income from their small-cap exposure.

Performance & risk comparison

What's inside

VB tracks a broad small-cap index, holding 1,357 stocks with a tilt toward industrials (19%), technology (17%), and healthcare (13%). Its top positions as of Jan. 2026 are Insmed (NASDAQ:INSM), Comfort Systems USA (NYSE:FIX), and SoFi Technologies (NASDAQ:SOFI), each making up less than 1% of assets. With 22 years on the market and over $163 billion in assets under management (AUM), VB offers scale and breadth, aiming to fully replicate its index.

SPSM, meanwhile, holds 607 companies and emphasizes financial services (18%), industrials (16%), and technology (15%). Its largest positions are Arrowhead Pharmaceuticals (NASDAQ:ARWR), LKQ Corp (NASDAQ:LKQ), and Armstrong World Industries (NYSE:AWI), all below 0.6% of assets. Both ETFs avoid leverage, hedging, or thematic screens, but SPSM’s narrower focus on the S&P SmallCap 600 may result in subtle differences in risk and sector mix.

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What this means for investors

Small-cap stocks are typically defined as companies with market capitalizations below $2 billion. They offer investors exciting high-growth potential but they also come with elevated volatility. Both of these ETFs offer diversified access to this space at a similar price, but differ in their size and approach.

Because VB tracks the CRSP US Small Cap Index with around 1,300 holdings, it casts a wider net across smaller companies. Its 0.05% expense ratio and $163 billion in assets make it one of the largest small-cap funds available. That size means tighter bid-ask spreads and easier trading for investors. SPSM follows the S&P SmallCap 600 with roughly 600 stocks and an ultra-low 0.03% expense ratio, appealing to cost-conscious investors despite its smaller $13 billion asset base.

Both funds favor industrials and technology, but have some differences in their sector allocations and top holdings. VB leans a bit more heavily into industrials, while SPSM allocates more to financials. Choose VB if you want maximum diversification across the small-cap universe and don't mind paying slightly more. Opt for SPSM if you prefer a tighter portfolio of 600 established small caps at rock-bottom cost, though small-cap volatility means both ETFs require a tolerance for market swings.

Glossary

ETF: Exchange-traded fund that holds a basket of securities and trades on an exchange like a stock.
Index-based: Investment strategy that seeks to replicate the performance of a specific market index, not beat it.
Expense ratio: Annual fund operating costs expressed as a percentage of the fund's average assets.
Dividend yield: Annual dividends per share divided by the current share price, shown as a percentage.
Beta: Measure of an investment’s volatility relative to the overall market, typically compared with the S&P 500.
AUM: Assets under management; the total market value of all assets a fund manages.
Total return: Investment return including price changes plus all dividends and distributions, assuming reinvestment.
Max drawdown: Largest peak-to-trough decline in an investment’s value over a specific period.
Small-cap: Companies with relatively small market capitalizations, generally offering higher growth potential and higher risk.
Sector weight: Percentage of a portfolio’s assets invested in a particular industry or sector.
Replication: Method where a fund holds the same securities as its index, in similar proportions.
Leverage: Use of borrowed money or derivatives to increase exposure beyond the fund’s net assets.

Sara Appino 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 ETF. The Motley Fool recommends LKQ. The Motley Fool has a disclosure policy.