Key insights
- The article suggests buying the dip in the Vanguard Small-Cap Value ETF (VBR). It highlights VBR's recent pullback from its 52-week high and its historical outperformance compared to rivals. The ETF's underlying index, the CRSP US Small Cap Value Index, provides exposure to small-cap value stocks with a median market cap of $9.8 billion, offering a buffer against volatility. This makes VBR a suitable candidate for buy-and-hold strategies.
As experienced investors know, there are always buy-the-dip candidates. The other side of that coin is that in strong bull markets, pullbacks don't always materialize to the extent that market participants would like.
Amid the recent small-cap resurgence, that's been the case with the Vanguard Small-Cap Value ETF (VBR +0.12%). Dating back to 2025, this exchange-traded fund's (ETF) dips, if they can even be called that, have been as shallow as rain puddles until recently. Following a modest gain on Monday, March 16, the Vanguard ETF resides 8% below its 52-week high set last month.
That's not quite a correction. A decline of 10% defines that, but the small-cap fund's slide may prove to be the buying opportunity some investors have been waiting for. At a minimum, this Vanguard ETF warrants monitoring over the near term because there are occasions in investing when it pays to get in. At the same time, the getting is good, and there's no guarantee this ETF will enter an extended slumber.
Undoubtedly, there have been lulls, and lengthy ones at that, but the combination of small-cap and value stocks has been a potent one over the long term, making this Vanguard ETF suitable for inclusion in buy-and-hold strategies. Speaking of performance, this value fund has beaten some of its most vaunted rivals over the past decade.
Part of the "secret" of this ETF's success lies in its plumbing. It tracks the CRSP US Small Cap Value Index, which is the value offshoot of the CRSP US Small Cap index. That benchmark excludes the 85% of the largest domestic stocks and the 2% of the smallest. That results in a median market capitalization of $9.8 billion for this ETF's holdings.
That's nearly five times the size of the high end of the strict definition of small cap. Some investors see that median market cap and may think they're being "cheated" out of a pure small-cap experience. However, what they're really getting is a buffer against some of the volatility that comes along with investing in smaller stocks. That protection is enhanced by the parent index sweeping out the smallest 2% of U.S. stocks.
What they're not being cheated out of is broad exposure to the U.S. smaller value stock opportunity set. This ETF holds 846 stocks, which is a beefy lineup compared to some competing funds.
The Vanguard Small-Cap Value ETF features other attractive attributes that make it a potentially rewarding buy-the-dip candidate. First, some experts argue that both small-cap and value stocks are setting up for an extended period of outperforming large caps and the broader market.
Second, this $34.4 billion ETF is easy to own over the long haul thanks to its low expense ratio. It charges just 0.05% per year, or $5 on a $10,000 investment. So not only is it inexpensive like so many of its Vanguard peers, its annual fee is well below the 1.09% category average.