Better Small-Cap ETF: Vanguard's VBK vs. Invesco's RZG
Key Points
The Vanguard Small-Cap Growth ETF offers a much lower expense ratio and larger assets under management than Invesco S&P SmallCap 600 Pure Growth ETF.
RZG edges out VBK on one-year total return but both showed nearly identical drawdowns and long-term growth.
VBK holds far more stocks and leans toward technology, while RZG has a heavier healthcare tilt.
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The Vanguard Small-Cap Growth ETF (NYSEMKT:VBK) stands out for its ultra-low costs, deep liquidity, and broader diversification, while the Invesco S&P SmallCap 600 Pure Growth ETF (NYSEMKT:RZG) delivers a marginally higher recent return and a more concentrated portfolio with a healthcare emphasis.
Both RZG and VBK aim to capture U.S. small-cap growth stocks, but they take distinct approaches in portfolio construction, sector exposure, and fees. This comparison breaks down how the two funds stack up on cost, performance, risk, portfolio makeup, and practical considerations for investors seeking small-cap growth exposure.
Snapshot (cost & size)
| Metric | RZG | VBK |
|---|---|---|
| Issuer | Invesco | Vanguard |
| Expense ratio | 0.35% | 0.07% |
| 1-yr return (as of 2026-01-09) | 15.9% | 14.4% |
| Dividend yield | 0.4% | 0.5% |
| AUM | $108.6 million | $39.7 billion |
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 is markedly more affordable with a 0.07% expense ratio compared to RZG’s 0.35%, and it pays a slightly higher dividend yield. The fee gap favors VBK for cost-conscious investors, while the marginally higher yield may also appeal to those seeking a small income boost.
Performance & risk comparison
| Metric | RZG | VBK |
|---|---|---|
| Max drawdown (5 y) | -38.31% | -38.39% |
| Growth of $1,000 over 5 years | $1,154 | $1,145 |
What's inside
VBK tracks a broad index of U.S. small-cap growth companies and currently holds 579 stocks, with a sector tilt toward technology (27%), industrials (21%), and healthcare (18%). Its largest single positions include Insmed Inc. (NASDAQ:INSM) at 1.44%, Comfort Systems USA Inc. (NYSE:FIX) at 1.13%, and SoFi Technologies Inc. (NASDAQ:SOFI) at 1.11% of assets. The fund’s 22-year track record and diversified holdings may help reduce idiosyncratic risk compared to more concentrated strategies.
RZG, by contrast, is built around the S&P SmallCap 600 Pure Growth Index, with a sharper focus on healthcare (26%), followed by industrials (18%) and financial services (16%). Its top holdings — ACM Research Inc. (NASDAQ:ACMR), PTC Therapeutics Inc. (NASDAQ:PTCT), and Progyny Inc. (NASDAQ:PGNY) — each represents a slightly larger slice of the portfolio than VBK’s top names. With 131 stocks, RZG is less diversified and may be more sensitive to swings in its favored sectors.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
While the Vanguard Small-Cap Growth ETF (VBK) and the Invesco S&P SmallCap 600 Pure Growth ETF (RZG) both focus on small-cap growth stocks, each uses a different approach that warrants consideration.
RZG tracks the S&P SmallCap 600 Pure Growth Index, but targets a smaller subset of stocks that exhibit strong growth characteristics. That’s why the ETF has only 131 holdings. But this leads to lower diversification, which can increase risk.
VBK has a lot going for it. With nearly 600 stocks, the ETF is highly diversified, providing less company-specific risk. Its expense ratio is low. Its assets under management are close to $40 billion, far higher than RZG, and giving it greater liquidity. However, its beta of 1.4 is slightly higher than RZG’s 1.2.
RZG is best for investors looking for an ETF with the potential to outperform, and who are comfortable with the higher fees and concentration risk. VBK is for investors who want to hold for the long term and want low costs with broader exposure to the small-cap growth market.
Glossary
ETF (Exchange-traded fund): A fund holding a basket of securities, traded on an exchange like a stock.
Expense ratio: Annual fund operating costs expressed as a percentage of the fund’s average assets.
Assets under management (AUM): The total market value of all assets managed by a fund.
Dividend yield: Annual dividends per share divided by the current share price, shown as a percentage.
Beta: A measure of an investment’s volatility compared with the overall market, often the S&P 500.
Total return: Investment performance including price changes plus all dividends and distributions, assuming reinvestment.
Max drawdown: The largest peak-to-trough decline in value over a specified period.
Small-cap: Companies with relatively small stock market values, typically a few hundred million to a few billion dollars.
Growth stocks: Companies expected to grow earnings or revenues faster than the overall market, often reinvesting profits.
Sector tilt: When a fund invests more heavily in certain industries than the broader market or benchmark.
Diversification: Spreading investments across many securities or sectors to reduce the impact of any single holding.
Idiosyncratic risk: Risk specific to a particular company or sector, not related to overall market movements.
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Robert Izquierdo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Comfort Systems USA, Progyny, and Vanguard Index Funds - Vanguard Small-Cap Growth ETF. The Motley Fool has a disclosure policy.
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