Small cap equities continue to outperform large caps, and for those who want factor-based exposure with a value tilt, there are funds available like the Vanguard Small-Cap Value Index Fund ETF Shares (VBR).

“Shares of small companies are outpacing their larger counterparts by the widest margin in more than two decades,” a Wall Street Journal article explained. “Behind their rise: confidence among investors that heavy stimulus and coronavirus vaccine deployment will boost the economy.”

“Through Friday, the Russell 2000 index of small companies had climbed 15% and set 10 closing records so far this year, well above the S&P 500’s 4% rise,” the article added. “That is the largest such gap between the two indexes through Feb. 19 since 2000, according to Dow Jones Market Data. Small-cap stocks and the S&P 500 edged lower on Monday.”

As for VBR, it seeks to track the performance of a benchmark index that measures the investment return of small-capitalization value stocks. The fund employs an indexing investment approach designed to track the performance of the CRSP US Small Cap Value Index, a broadly diversified index of value stocks of small U.S. companies.

The advisor attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index.

VBR:

  1. Seeks to track the performance of the CRSP US Small Cap Value Index, which measures the investment return of small-capitalization value stocks.
  2. Provides a convenient way to match the performance of a diversified group of small value companies.
  3. Follows a passively managed, full-replication approach.
  4. Boasts a low expense ratio of 0.07%.
  5. Has been up 12.46% YTD.

VBR Chart

More Room to Climb for Small Caps

One of the highlights of small cap equity investing is the ability to capitalize on value-added growth companies that can provide room for more future gains. On the opposite end of the spectrum, large cap equities like big tech stocks may have already reached their peaks.

“The sustained leadership from small-caps also shows how traders are pouring money into investments that they think have more room to climb,” the WSJ article added further. “Large technology companies, which pulled markets higher for much of the past decade and have been among the most widely owned stocks by investors for years, have pulled back in recent sessions.”

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