Vanguard Small-Cap ETF

VB

Market cap $80.3B

Small caps have been having a banner year, with the Russell 2000 outperforming the S&P 500 year-to-date. Some small-cap focused ETFs have also surpassed that benchmark.

The Vanguard Small-Cap ETF is rated BUY, offering broad, low-cost exposure to over 1,315 U.S. small-cap companies at a 0.03% expense ratio. I expect market leadership to broaden beyond mega-cap tech, positioning VB to benefit from increased participation across the equity market. VB's sector allocation—led by industrials, technology, and financials—aligns with a scenario where economic sensitivity and domestic growth regain importance.

IJR carries a slightly higher fee than VB. VB provides broader exposure, holding more than twice as many stocks as IJR.

The small-cap equities world carries a number of risks—unproven companies, higher volatility, and so on—but also brings the opportunity for growth that may outpace some larger names. International small-cap names may be heating up, and while small-cap stocks in the United States have already had a good run, many valuations remain comparably attractive when held up against mega-cap tech stocks and other top names.

State Street SPDR Portfolio S&P 600 Small Cap ETF and Vanguard Small-Cap ETF share the same ultra-low expense ratio of 0.03%. Vanguard Small-Cap ETF holds more than twice as many stocks as State Street SPDR Portfolio S&P 600 Small Cap ETF, providing broader market exposure.

The Vanguard Small-Cap ETF and iShares Morningstar Small-Cap ETF both provide broad exposure to small-cap stocks with very low expense ratios. The iShares Morningstar Small-Cap ETF delivered a slightly higher 1-year total return, though the Vanguard Small-Cap ETF has significantly more assets under management.

The iShares Morningstar Small-Cap ETF (ISCB) provides a slightly higher dividend yield than the Vanguard Small-Cap ETF (VB). VB has far greater assets under management (AUM) compared to ISCB.

The ETF market saw a dramatic macroeconomic shift this past week as investors re-evaluated risk exposure. A sudden drop in energy prices early in the week initially gave investors confidence, moving away from concentrated defensive funds into broader market exposure.

Low-cost index ETFs from Vanguard, Schwab, and Invesco provide diversified market exposure across different U.S. equity segments for long-term portfolio building.

The Vanguard Small-Cap ETF (VB) trades at a P/E ratio of 21.6, well below the 27.4 multiple of the Vanguard S&P 500 ETF (VOO). In 2027, year-over-year earnings growth for small caps is forecast to accelerate to 18.3%, compared to 17.3% for large caps.