If you're interested in broad exposure to the Small Cap Growth segment of the US equity market, look no further than the Vanguard Small-Cap Growth ETF (VBK), a passively managed exchange traded fund launched on 01/26/2004.
The fund is sponsored by Vanguard. It has amassed assets over $20.50 billion, making it the largest ETFs attempting to match the Small Cap Growth segment of the US equity market.
Why Small Cap Growth
With more potential comes more risk, and small cap companies, with market capitalization below $2 billion, epitomizes this way of thinking.
While growth stocks do boast higher than average sales and earnings growth rates, and they are expected to grow faster than the wider market, investors should note these kinds of stocks have higher valuations. Also, growth stocks are a type of equity that carries more risk compared to others. When you consider growth versus value, growth stocks are usually the clear winner in strong bull markets but tend to fall flat in nearly all other environments.
Costs
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.07%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 0.51%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Information Technology sector--about 23.30% of the portfolio. Industrials and Healthcare round out the top three.
Looking at individual holdings, Axon Enterprise Inc (AXON) accounts for about 1.56% of total assets, followed by Applovin Corp (APP) and Slcmt1142.
Performance and Risk
VBK seeks to match the performance of the CRSP U.S. Small Cap Growth Index before fees and expenses. The CRSP U.S. Small Cap Growth Index measures the investment return of small-capitalization growth stocks.
The ETF has gained about 5.34% so far this year and it's up approximately 25.37% in the last one year (as of 02/06/2025). In the past 52-week period, it has traded between $237.63 and $304.19.
The ETF has a beta of 1.17 and standard deviation of 23.75% for the trailing three-year period, making it a medium risk choice in the space. With about 613 holdings, it effectively diversifies company-specific risk.
Alternatives
Vanguard Small-Cap Growth ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, VBK is an outstanding option for investors seeking exposure to the Style Box - Small Cap Growth segment of the market. There are other additional ETFs in the space that investors could consider as well.
The iShares S&P Small-Cap 600 Growth ETF (IJT) and the iShares Russell 2000 Growth ETF (IWO) track a similar index. While iShares S&P Small-Cap 600 Growth ETF has $6.73 billion in assets, iShares Russell 2000 Growth ETF has $12.83 billion. IJT has an expense ratio of 0.18% and IWO charges 0.24%.
Bottom-Line
Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Vanguard Small-Cap Growth ETF (VBK): ETF Research Reports
AppLovin Corporation (APP) : Free Stock Analysis Report
iShares Russell 2000 Growth ETF (IWO): ETF Research Reports
iShares S&P Small-Cap 600 Growth ETF (IJT): ETF Research Reports
Axon Enterprise, Inc (AXON) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
