Should Vanguard Small-Cap Growth ETF (VBK) Be on Your Investing Radar?

Launched on 01/26/2004, the Vanguard Small-Cap Growth ETF (VBK) is a passively managed exchange traded fund designed to provide a broad exposure to the Small Cap Growth segment of the US equity market.

The fund is sponsored by Vanguard. It has amassed assets over $15.55 billion, making it the largest ETFs attempting to match the Small Cap Growth segment of the US equity market.

Why Small Cap Growth

Small cap companies have market capitalization below $2 billion. They usually have higher potential than large and mid cap companies with stocks but higher risk.

Growth stocks have higher than average sales and earnings growth rates. While these are expected to grow faster than the broader market, they also have higher valuations. Further, growth stocks have a higher level of volatility associated with them. 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

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

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 0.66%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Industrials sector--about 19.90% of the portfolio. Information Technology and Healthcare round out the top three.

Looking at individual holdings, Slcmt1142 accounts for about 0.97% of total assets, followed by Deckers Outdoor Corp (DECK) and Draftkings Inc (DKNG).

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 lost about -19.13% so far this year and is down about -10.54% in the last one year (as of 04/08/2025). In the past 52-week period, it has traded between $226.07 and $304.19.

The ETF has a beta of 1.17 and standard deviation of 23.67% for the trailing three-year period, making it a medium risk choice in the space. With about 599 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 excellent 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 $5.21 billion in assets, iShares Russell 2000 Growth ETF has $9.63 billion. IJT has an expense ratio of 0.18% and IWO charges 0.24%.

Bottom-Line

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

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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This article originally published on Zacks Investment Research (zacks.com).

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