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Should Vanguard S&P Small-Cap 600 Value ETF (VIOV) Be on Your Investing Radar?

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Designed to provide broad exposure to the Small Cap Value segment of the US equity market, the Vanguard S&P Small-Cap 600 Value ETF (VIOV - Free Report) is a passively managed exchange traded fund launched on 09/09/2010.

The fund is sponsored by Vanguard. It has amassed assets over $293.92 M, making it one of the average sized ETFs attempting to match the Small Cap Value segment of the US equity market.

Why Small Cap Value

With more potential comes more risk, and small cap companies, with market capitalization below $2 billion, epitomizes this way of thinking.

Value stocks are known for their lower than average price-to-earnings and price-to-book ratios, but investors should also note their lower than average sales and earnings growth rates. When you look at long-term performance, value stocks have outperformed growth stocks in nearly all markets. But in strong bull markets, growth stocks are more likely to be winners.

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 0.20%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.25%.

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 Financials sector--about 20.50% of the portfolio. Industrials and Consumer Discretionary round out the top three.

Looking at individual holdings, Caci International Inc. Class A (CACI - Free Report) accounts for about 0.97% of total assets, followed by Spire Inc. (SR - Free Report) and Pdc Energy Inc. .

The top 10 holdings account for about 7.75% of total assets under management.

Performance and Risk

VIOV seeks to match the performance of the S&P SmallCap 600 Value Index before fees and expenses. The S&P SmallCap 600 Value Index represents the value companies of the S&P SmallCap 600 Index.

The ETF has added roughly 5.99% so far this year and was up about 19.66% in the last one year (as of 05/28/2018). In the past 52-week period, it has traded between $114.75 and $141.36.

The ETF has a beta of 1.06 and standard deviation of 15.88% for the trailing three-year period, making it a medium risk choice in the space. With about 456 holdings, it effectively diversifies company-specific risk.

Alternatives

Vanguard S&P Small-Cap 600 Value 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, VIOV is a reasonable option for those seeking exposure to the Small Cap ETFs area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell 2000 Value ETF (IWN - Free Report) and the Vanguard Small-Cap Value ETF (VBR - Free Report) track a similar index. While iShares Russell 2000 Value ETF has $9.65 B in assets, Vanguard Small-Cap Value ETF has $13.30 B. IWN has an expense ratio of 0.24% and VBR charges 0.07%.

Bottom-Line

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.