There are plenty of cost-effective, broad market ETFs on the market today, but while these funds typically hold massive numbers of this stocks, these products also tilt toward large-cap equities.
A convenient avenue for obtaining broad-based mid- and small-cap exposure under the umbrella of a single ETF is the Vanguard Extended Market ETF (NYSEArca: VXF). VXF is intended to be a complement to traditional S&P 500 exposure because the Vanguard ETF holds an array of smaller stocks not found in the benchmark U.S. equity index.
VXF’s benchmark is the S&P Completion Index, which is a collection of domestic, publicly traded companies not in the S&P 500. The median market value of VXF’s 3,296 holdings is $4.6 billion, putting the fund in mid-cap territory.
“Market-cap weighting skews the fund toward the largest names outside of the S&P 500, but it reaches further down the market-cap spectrum than most mid-blend Morningstar Category peers and straddles the mid- and small-cap size segment breakpoint,” said Morningstar in a note out Friday. “Indeed, its average market capitalization is about half that of the category average. The fund’s broad reach and market-cap weighting should help it effectively diversify firm-specific risk.”
The $6.5 billion VXF is another low-cost ETF from Vanguard. The fund charges just 0.08% per year, or $8 on a $10,000 investment, making it cheaper than 92% of competing funds, according to Vanguard data.