1 Overlooked Vanguard ETF Is Outpacing the S&P 500 This Year at a Bargain Cost

Small-cap stocks are distinguishing themselves in big, positive ways this year. The two largest exchange-traded funds (ETFs) in the category are up an average of 21.4% year to date, easily outpacing the S&P 500's 9.5% gains.

Small-cap growth stocks are attendees of this party, leaving investors to wonder why the Vanguard Small-Cap Growth ETF (NYSEMKT: VBK) isn't generating more buzz these days. To be sure, it's a bit of a stretch to call this ETF "overlooked," at least in broad terms. It's more than 22 years old, and with $23.8 billion in assets under management, it's the sixth-largest fund in the small-cap ETF camp.

This high-flying Vanguard ETF is surprisingly overlooked. Image source: Getty Images.

Add in some investors' affinity for high-octane equities, and it's arguably surprising this growth ETF isn't one of the belles of the 2026 small-cap ball. Notoriety or lack thereof aside, this Vanguard ETF is worth a place on long-term investors' small-cap shopping lists.

VBK makes things easy

One primary advantage of small-cap stocks is the potential for higher growth than in typical large-cap names. Obviously, smaller growth stocks can ratchet up that growth proposition.

But whether it's growth or value, stock picking among smaller equities is difficult because research firms simply don't have or won't allocate the resources necessary to cover small-cap equities. By some estimates, more than half the small- and mid-cap stocks trading in the U.S. don't have a single sell-side analyst covering them. Conversely, 61 analysts track Nvidia.

Lack of analyst coverage highlights an advantage offered by the Vanguard Small-Cap Growth ETF. In addition to tapping into the potency of the growth/small-cap union, the fund holds 544 stocks, alleviating investors' stock-picking burden.

This ETF's deep bench is important for another reason. The small-cap opportunity, including the aforementioned potential growth rates, access to innovative companies, and the possibility of finding hidden gems, comes with risks. Those drawbacks include, in some cases, elevated volatility, crimped liquidity, and the specter of some smaller companies outright flopping. This Vanguard ETF doesn't fully eliminate those risks, but it mitigates them by spreading its bets, as none of the fund's holdings command a weight of more than 1.2%.

A sound bet for risk-tolerant investors

For risk-tolerant market participants with long-term perspectives, this fund is one of the best Vanguard ETFs to consider. It's an effective representation of the domestic small-cap growth universe as highlighted by a combined weight of almost 42% to technology and healthcare stocks, which are often lynchpins of small-cap growth strategies.

Another perk for investors planning to hold this ETF for multiple years is its low annual expense ratio of 0.05%, which places it in the cheapest quintile of small-cap growth funds.

Overlooked or not, this ETF is ideal for investors who want the benefits of small-cap growth without the segment's casino-like feel.

Todd Shriber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Vanguard Index Funds-Vanguard Small-Cap Growth ETF. The Motley Fool has a disclosure policy.