If you're interested in broad exposure to the Small Cap Growth segment of the US equity market, look no further than the Vanguard S&P SmallCap 600 Growth ETF (VIOG), a passively managed exchange traded fund launched on 09/09/2010.
The fund is sponsored by Vanguard. It has amassed assets over $438.97 million, making it one of the average sized ETFs attempting to match the Small Cap Growth segment of the US equity market.
Why Small Cap Growth
Sitting at a market capitalization below $2 billion, small cap companies tend to be high-potential stocks compared to its large and mid cap counterparts, but come with higher risk.
Qualities of growth stocks include faster growth rates compared to the broader market, as well as higher valuations and higher than average sales and earnings growth rates. Also, growth stocks are a type of equity that carries more risk compared to others. Even though growth stocks are more likely to outperform their value counterparts in strong bull markets, value stocks have a record of delivering better returns in almost all markets than growth stocks.
When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.15%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 1.02%.
Sector Exposure and Top Holdings
ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Information Technology sector--about 18.40% of the portfolio. Financials and Healthcare round out the top three.
Looking at individual holdings, Omnicell Inc. (OMCL) accounts for about 1.36% of total assets, followed by Pdc Energy Inc. (PDCE) and Vonage Holdings Corp. (VG).
The top 10 holdings account for about 8.7% of total assets under management.
Performance and Risk
VIOG seeks to match the performance of the S&P Small-Cap 600 Growth Index before fees and expenses. The S&P Small-Cap 600 Growth Index represents the growth companies of the S&P Small-Cap 600 Index.
The ETF has lost about -25.77% so far this year and is down about -20.30% in the last one year (as of 06/23/2022). In the past 52-week period, it has traded between $174.71 and $247.60.
The ETF has a beta of 1.13 and standard deviation of 30.14% for the trailing three-year period, making it a medium risk choice in the space. With about 332 holdings, it effectively diversifies company-specific risk.
Vanguard S&P SmallCap 600 Growth ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, VIOG is a sufficient option for those seeking exposure to the Style Box - Small Cap Growth area of the market. Investors might also want to consider some other ETF options in the space.
The iShares Russell 2000 Growth ETF (IWO) and the Vanguard SmallCap Growth ETF (VBK) track a similar index. While iShares Russell 2000 Growth ETF has $8.81 billion in assets, Vanguard SmallCap Growth ETF has $11.47 billion. IWO has an expense ratio of 0.24% and VBK charges 0.07%.
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they 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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