VB vs VBK: Which Small Cap ETF Is Best?

We compare VB vs VBK:

Vanguard Small-Cap ETF (VB) and Vanguard Small-Cap Growth ETF (VBK) are both among the best small-cap exchange-traded funds (ETFs).

These two ETFs are very popular.

This article will help you decide between VB vs VBK.

 

VB vs VBK

The main difference between VB and VBK is their expense ratio.  VB has an expense ratio of 0.05%, while VBK has an expense ratio of 0.07%.  This means VBK is more expensive compared to VB.

Investment costs can make a significant difference over the long term.

VB has an expense ratio of 0.05%

VBK has an expense ratio of 0.07%

Another difference is the index these ETFs track.  For example, VB tracks the CRSP US Small Cap Index, while VBK tracks the CRSP US Small Cap Growth Index.

VB

• Tracks the CRSP US Small Cap Index
• Expense Ratio: 0.05%
• Number Of Stocks: 1,548
• Dividend Yield 1.17%

VBK

• Tracks the CRSP US Small Cap Growth Index
• Expense Ratio: 0.07%
• Number Of Stocks: 751
• Dividend Yield 0.45%

Lastly, another significant difference is the number of stocks in each, with VB having 1548 different companies compared to 751 with VBK.

 

VB vs VBK Performance

VB and VBK have performed similarly over the last 10 years, with VB beating VBK by only 0.47% annually.

However, that does not guarantee the next 10 years will look the same.

Here is a side-by-side comparison of their performance:

Here is VB vs VBK performance on a chart:

As you can see, VB and VBK performance have overlapped over the last 10 years, with a difference of only 0.47% annually.

Similarities between VB and VBK:

• Vanguard ETFs
• Exchange-Traded Funds (ETFs)
• Similar Performance
• Focus On Small Cap Companies

 

VB and VBK Differences

The primary difference between VB and VBK is the index they track.  VB tracks the CRSP US Small Cap Index, while VBK tracks the CRSP US Small Cap Growth Index.

Another difference between VB and VBK is the number of stocks in each, with VB having 1548 different companies compared to 751 with VBK.

This hasn’t made a difference in their performance.  They are both focused on US small-cap stocks.

However, the increased holdings give VB more diversification within the small-cap sector and likely less volatility.

Both are passively managed Vanguard ETFs with relatively low expense ratios (0.05% vs 0.07%).

You keep more of your returns by investing in ETFs with low expense ratios.  This can make a big difference over time.

Differences between VB and VBK:

• Expense Ratio (0.05% vs 0.07%)
• Number Of Holdings (1,548 vs 751)
• Index The Fund Tracks
• Level Of Diversification
• Level Of Volatility

 

VB vs VBK Holdings

Vanguard’s VBK has fewer holdings than VB (751 vs 1,548).  They also have very different top 10 holdings with only 3 overlapping companies in their top 10 holdings.

VB’s top 10 holdings make up 5% of its total holdings compared to 8% with VBK.

This makes VBK less diversified compared to VB.  As a result, VBK’s performance will also have more volatility depending on the performance of these top 10 holdings.

Here is VB and VBK’s top 10 holdings side by side:

VB and VBK are primarily made up of U.S Small-Cap Companies.

 

VB and VBK Holdings Overlap

There is an overlap between VB and VBK that includes 649 stocks.  Roughly 45% of VB’s holdings are included in VBK, and 99% of VBK’s holdings are in VB.

Here are VB and VBK holdings overlap:

There is an overlap by weight of about 40%:

This gives VB more diversification compared to VBK.

 

VB Profile

• Fund Inception: 2004
• Expense Ratio: 0.05%
• Number Of Stocks: 1,548
• Top 10 Holdings: 5%

Vanguard Small-Cap ETF (VB) is an ETF focused on small-cap companies.  The price-to-earning (P/E) ratio for VB is 15x, low compared to other ETFs.

The fund has $131 billion in total net assets.

 

VB Performance

Vanguard Small-Cap ETF (VB) has underperformed the S&P 500 and, therefore, Vanguard 500 Index Fund ETF (VOO) over the last 10 years:

VB has averaged a 12% return over the previous 10 years which is excellent.

However, remember that this does not guarantee that the next 10 years will look the same.

 

VB Holdings

Vanguard’s VB comprises Molina Healthcare, Quanta, Marathon Oil, Constellation Energy, and Entegris and provides exposure to over 1500 stocks.

The top 10 holdings make up 3% of the portfolio.

This makes VB highly diversified within the U.S. small-cap sector. However, investors looking for broader diversification can consider other ETFs, such as Vanguard Total Stock Market Index Fund ETF (VTI).

 

VBK Profile

• Fund Inception: 2004
• Expense Ratio: 0.07%
• Number Of Stocks: 751
• Top 10 Holdings: 8%

Vanguard Small-Cap Growth ETF (VBK) is focused on small-capitalization growth stocks.  As a result, the price-to-earnings (P/E) ratio for VBK is 27 x, which is high.

That is expected with a growth index.  The fund has $32 billion in total net assets.

VBK was created in 2004 and has an expense ratio of 0.07%.  This is more expensive than VB, which has an expense ratio of 0.05%.

Here is what a 0.02% fee (difference between VBK and VB) will cost over 30 years.

Assuming you start with an initial investment of $100,000 and contribute $10,000 yearly over 30 years.  You will have roughly ~$20,000 less in your account.

This does not include costs to buy and sell your shares.

 

VBK Performance

Vanguard’s VBK has underperformed the S&P 500 over the last 10 years but not by much.

VBK has averaged an 11% return over the last 10 years which is excellent.

However, remember that this does not guarantee that the next 10 years will look the same.

 

VBK Holdings

Vanguard VBK’s top 10 holdings include Entegris, Bio-Techne, Liberty Media, Wolfspeed, and Darling.  The ETF also provides exposure to over 700 stocks.

The top 10 holdings make up over 6% of the portfolio.  This gives VBK diversification within the small-cap sector but not broad diversification like other ETFs like the Vanguard Total Stock Market Index Fund ETF (VTI).

 

No Minimum Investment

VB and VBK are exchange-traded funds (ETFs), so there is no minimum investment.  Investors looking to buy fractional shares can use platforms like M1 Finance.

Typically, fractional shares are not available for ETFs, but with M1 Finance, you can purchase fractional shares with no commission.

Buying fractional shares allows you to maximize your investment.  This is great for shares of VB or VBK due to their high prices per share.

There are two easy ways to invest in VB or VBK commission-free:

1. Vanguard
2. M1 Finance (Use this link for $50 when you open a new account)

Both of these options are free.  This is important because fees can lower our returns.

M1 Finance is the best option because it allows you to purchase VB, VBK, and thousands of other stocks.

I also use Personal Capital to track my investment fees. They have a free Retirement Fee Analyzer that tells you the future impact of fees on your portfolio.

Personal Capital’s free tools allow you to quickly find which of your investments has high fees so you can switch them to low-cost options.  (Get a $20 Amazon Gift Card with this link when you add at least one investment account containing a balance of more than $1,000 within 30 days)

 

Which Is Better VB or VBK?

VB and VBK are similar investments.  However, VB is better because it has a significantly lower expense ratio of 0.05%.  In addition, they both offer investors the ability to invest in the U.S Small Cap Growth Market.

VB offers similar returns with less volatility and lower cost than VBK.

The expense ratio difference between these two ETFs significantly affects total returns.  Especially when you consider you are essentially getting the same market exposure.

You can further keep costs down by buying and selling shares commission-free.

Again a great way to do this is with M1 Finance.

You can purchase fractional shares for free, allowing you to buy VBK, VB, and thousands of other stocks/ETFs.

Related Posts:

• VOO vs VOOG
• VOOG vs QQQ
• VUG vs VOO
• VUG vs SCHG
• VIOV vs VBR

 

Is VB or VBK Better for Financial Independence?

VB and VBK can help you reach Financial Independence and Retire Early (FIRE).  They both have similar returns on investment.  They also have performed excellently over the last 10 years.

I prefer VB because I’m a big fan of keeping fees to a minimum.  It doesn’t get much better than VB, with a tiny expense ratio of 0.05%.

I would also suggest looking into other funds that give you more diversification, like VTSAX.

Calculate Your FI Number With My Free FIRE Calculator

 

My Winner: VB

My winner is VB based on the increased diversification and lower expense ratio.

Both ETFs have low expense ratios and have performed well over the last decade.

There is also no guarantee that the next 10 years will look the same, but with their low cost, I believe VBK and VB can make a great addition to an investor’s portfolio.

You would likely want to consider other index funds with more diversification into different sectors or countries as a core holding.