VBR vs SLYV: Vanguard ETF Comes Out on Top
💡 Key Takeaway
Vanguard Small-Cap Value ETF (VBR) offers lower expenses, higher diversification, and superior long-term performance compared to State Street's SLYV.
What Happened: Vanguard's VBR Outshines State Street's SLYV in ETF Comparison
A recent analysis compared two popular small-cap value ETFs: Vanguard Small-Cap Value ETF (VBR) and State Street SPDR S&P 600 Small Cap Value ETF (SLYV). VBR tracks the CRSP US Small Cap Value Index, holding 835 stocks, while SLYV follows the S&P SmallCap 600 Value Index with 462 stocks. Key metrics show VBR has a much lower expense ratio of 0.05% versus SLYV's 0.15%.
Performance data reveals that VBR has delivered superior five-year returns and a lower maximum drawdown (24.2% vs. 28.7%). Although SLYV had a higher one-year return (39.7% vs. 27.1%), the article emphasizes long-term consistency. VBR also has significantly larger assets under management ($65.5 billion vs. $4.8 billion), indicating broader investor adoption.
Both ETFs are well-diversified, with no single holding exceeding 1.3% of assets. VBR's top holdings include Flex (FLEX), Jabil (JBL), and Tapestry (TPR). SLYV's top holdings include Molina Healthcare (MOH), Match Group (MTCH), and Eastman Chemical (EMN). The main difference lies in index methodology: SLYV applies a profitability filter, while VBR offers a broader, more traditional value approach.
The article concludes that VBR is more attractive due to its lower cost, better long-term performance, and higher liquidity. These factors align with a conservative, low-cost investing philosophy often associated with Vanguard.
Why It Matters: Cost and Diversification Drive ETF Returns
For investors seeking small-cap value exposure, the choice between VBR and SLYV can significantly impact long-term returns. Expense ratios compound over time; VBR's 0.05% fee means investors keep more of their gains compared to SLYV's 0.15% fee. Over a decade, this difference can amount to thousands of dollars.
Diversification also plays a role. VBR's 835 holdings reduce idiosyncratic risk from any single stock, while SLYV's 462 holdings and profitability filter may lead to higher concentration and potential missed opportunities. The fact that VBR has a lower maximum drawdown suggests it is less volatile during downturns, which is crucial for risk-averse investors.
Competitively, Vanguard's scale gives it cost advantages that State Street struggles to match. This comparison underscores the importance of evaluating ETFs beyond trailing returns—focusing on fees, index methodology, and portfolio construction. As more investors become cost-conscious, VBR may continue to attract assets, putting pressure on SLYV to lower fees or improve performance.
From a future outlook, the small-cap value segment remains volatile but offers growth potential. VBR's broader approach might capture more upside in a broad market rally, while SLYV's profitability screen could provide downside protection. However, given the evidence, VBR appears to offer a better risk-return profile over the long term.
Source: The Motley Fool
Analysis generated by Bobby AI quantitative model, reviewed and edited by our research team. This is not financial advice. Always do your own research before making investment decisions.
Bobby Insight
VBR is the superior choice for small-cap value exposure due to lower costs and better risk-adjusted returns.
VBR's 0.05% expense ratio and 835 holdings provide a cost-effective and diversified portfolio. Its five-year performance and lower drawdowns indicate a more resilient fund. While SLYV's profitability filter is attractive, the higher fees and concentration make VBR more compelling.
What This Means for Me
