What Is the Vanguard Small-Cap Value ETF, and Should You Buy It?
Key Points
Vanguard projects U.S. small-cap stocks might outperform large caps by at least 1% per year in the next 10 years.
The Vanguard Small-Cap Value ETF has delivered a 9.5% annualized return since 2004, trailing the S&P 500.
But sometimes small caps outperform -- this value ETF beat the S&P 500 for seven years straight starting in 2010.
- 10 stocks we like better than Vanguard Small-Cap Value ETF ›
The most successful stocks of the next 10 years might not be the biggest names. According to recent Vanguard research, U.S. value stocks and small-cap stocks are expected to outperform U.S. growth and large-cap stocks. The investment firm's researchers believe that the biggest economic benefits from the artificial intelligence (AI) era might ultimately go to smaller companies.
Here's what Vanguard's model projects for annualized returns in the next 10 years:
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now, when you join Stock Advisor. See the stocks »
|
Type of stocks |
Expected return range (next 10 years) |
|---|---|
|
U.S. value stocks |
5.9%-7.9% |
|
U.S. small-cap stocks |
5.8%-7.8% |
|
U.S. large-cap stocks |
4.8%-6.8% |
|
U.S. growth stocks |
4.3%-6.3% |
Data source: Vanguard
There's no guarantee that any investment company's research will be 100% correct. But if you agree with the general strategy that today's smaller companies and overlooked stocks might be better investments during the next 10 years, you might want to buy the Vanguard Small-Cap Value ETF (NYSEMKT: VBR). Let's look at this value stock exchange-traded fund (ETF) and see if it's worth adding to your portfolio.
Image source: Getty Images.
Vanguard Small-Cap Value ETF (VBR): 835 stocks, 22 years of 9.5% annualized returns
The Vanguard Small-Cap Value ETF owns a total of 835 stocks with a median market cap of $10 billion each. This is a diversified fund that makes it easy to own hundreds of small U.S. value companies at an ultra-low expense ratio of 0.05%.
The fund's top holdings by sector include industrials (21.5% of the fund), financials (18.1%), consumer discretionary (13.9%), technology (9.6%), and real estate (9.5%). This value ETF has delivered a total return (by net asset value) of 27.01% in the past year, about on par with the S&P 500.
Over the longer term, this value ETF has strongly underperformed the S&P 500. Since its inception in January 2004, the Vanguard Small-Cap Value ETF has delivered an average annual return of 9.51%. The S&P 500 has delivered total returns of 904.5% since this fund was launched.
VBR Total Return Level data by YCharts
Is now a good time to buy value stocks?
Small-cap stocks don't always underperform the market. Sometimes they outperform large caps for a long time. For example, from 2010 to 2017, the Vanguard Small-Cap Value ETF delivered total returns of 156%, outperforming the S&P 500, which gained 132.9%.
VBR Total Return Level data by YCharts
Small caps may be at the start of another market cycle in which they outgrow big-name companies. And if Vanguard's research projections are correct, small caps might be some of the best investments for several years to come.
If you're a long-term investor who believes in the future growth potential of small-cap value stocks, the Vanguard Small-Cap Value ETF could be a good buy.
Should you buy stock in Vanguard Small-Cap Value ETF right now?
Before you buy stock in Vanguard Small-Cap Value ETF, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard Small-Cap Value ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $396,542!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,299,961!*
Now, it’s worth noting Stock Advisor’s total average return is 931% — a market-crushing outperformance compared to 210% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of July 15, 2026.
Ben Gran has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Recommended Articles
