Small-cap companies tend to be U.S. focused and are more closely tided to the well being of the U.S. economy. With the U.S. economy on the rise and low energy prices fueling growth, smaller company stocks could continue to outperform. [Small-Cap ETFs for U.S. Growth]
That is also true of international small-caps as it pertains to their home markets, but VSS is not a currency hedged ETF, a trait that must be acknowledged at a time of dollar strength. Still, VSS offers plenty of advantages of compared to rival actively managed mutual funds, which often carry heftier fees.
“As an index fund, it has had low turnover and has not made a capital gains distribution over the past four years. This compares favorably to actively managed small-cap funds, which tend to have higher turnover and more capital gains distributions. In the 12 months ended February 2015, this fund’s tax-cost ratio (which measures the cost of taxes from both dividends and distributed capital gains) was 1.09 versus the category average of 1.85,” according to Morningstar.
Vanguard FTSE All World ex-US Small-Cap ETF
