Is Vanguard's VB or SPDR's SPSM the Better Small-Cap ETF Buy? Here's What Investors Need to Know.
Key Points
Both funds charge the same ultra-low expense ratio, but SPSM pays a slightly higher dividend yield.
VB holds over twice as many stocks as SPSM, leading to broader small-cap exposure.
Recent performance and risk metrics for both ETFs are very similar, with only minor differences in drawdown and volatility.
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The Vanguard Small-Cap ETF (NYSEMKT:VB) and the State Street SPDR Portfolio S&P 600 Small Cap ETF (NYSEMKT:SPSM) are both designed for investors seeking low-cost, broad access to U.S. small-cap stocks, but their portfolios and performance nuances may appeal to different preferences. Here’s how the two funds stack up on the most important factors.
Snapshot (cost & size)
| Metric | VB | SPSM |
|---|---|---|
| Issuer | Vanguard | SPDR |
| Expense ratio | 0.03% | 0.03% |
| 1-yr return (as of Feb. 12, 2026) | 10.65% | 10.28% |
| Dividend yield | 1.27% | 1.53% |
| AUM | $169 billion | $14 billion |
| Beta (5Y monthly) | 1.23 | 1.19 |
Beta measures price volatility relative to the S&P 500. The 1-yr return represents total return over the trailing 12 months.
Both funds charge an annual fee of 0.03%, offering identical cost advantages. SPSM offers a marginally higher dividend yield, however, which may appeal to income-focused investors.
Performance & risk comparison
| Metric | VB | SPSM |
|---|---|---|
| Max drawdown (5 y) | -28.16% | -27.95% |
| Growth of $1,000 over 5 years | $1,260 | $1,216 |
What's inside
SPSM tracks the S&P SmallCap 600 Index and holds 607 stocks, with financial services (17% of assets), industrials (16%), and consumer cyclical (15%) as its top sectors.
Its largest positions include Solstice Advanced Materials, Advanced Energy Industries, and Arrowhead Pharmaceuticals. The fund has a 12-year history and aims to offer precise, comprehensive small-cap exposure, with no leverage, ESG, or currency quirks noted.
VB, in contrast, holds a much broader basket with 1,324 stocks, emphasizing industrials (19%), technology (17%), and financial services (13%). Its top holdings are Rocket Lab, Sandisk, and Ciena.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
Investing in a small-cap ETF can be a smart way to diversify your portfolio and gain exposure to smaller companies with plenty of growth potential.
VB is the more diversified of the two, holding more than twice as many stocks as SPSM. Greater diversification can help limit risk, especially with small-cap stocks that tend to be less stable than their larger counterparts.
VB also leans more heavily into the technology sector, accounting for 17% of the portfolio, compared to 13% for SPSM. Tech stocks can face greater price swings, as evidenced by VB’s slightly higher beta and deeper max drawdown, but they can also be more lucrative over time.
While the two funds have achieved similar 12-month and five-year total returns, VB has marginally outperformed SPSM in both periods.
Deciding between the two ETFs will come down to your investing goals. Those seeking exposure to a larger basket of stocks may prefer VB’s massive portfolio, while those looking to limit tech exposure and focus on a narrower selection of stocks might instead opt for SPSM.
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Katie Brockman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Ciena, Rocket Lab, and Vanguard Index Funds - Vanguard Small-Cap ETF. The Motley Fool has a disclosure policy.
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