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VIOV vs VBR: Which Small Cap ETF Is Better?

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We compare VIOV vs VBR:

Vanguard S&P Small-Cap 600 Value ETF (VIOV) and Vanguard Small-Cap Value ETF (VBR) are both among the best small-cap exchange-traded funds (ETFs).

These two ETFs are very popular.

This article will help you decide between VIOV vs VBR.

VIOV vs VBR Graphic

 

VIOV vs VBR

The main difference between VIOV and VBR is their expense ratio.  VIOV has an expense ratio of 0.15%, while VBR has an expense ratio of 0.07%.  This means VIOV is more than twice as expensive compared to VBR.

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

VIOV has an expense ratio of 0.15%

VBR has an expense ratio of 0.07%

Another difference is the index these ETFs track.  For example, VIOV tracks the S&P Small-Cap 600 Value Index while VBR tracks the CRSP US Small Cap Value Index.

VIOV

  • Tracks the S&P Small-Cap 600 Value Index
  • Expense Ratio: 0.15%
  • Number Of Stocks: 463
  • Dividend Yield 1.56%

VBR

  • Tracks the CRSP US Small Cap Value Index
  • Expense Ratio: 0.07%
  • Number Of Stocks: 927
  • Dividend Yield 1.82%

Lastly, another significant difference is the number of stocks in each, with VIOV having 463 different companies compared to 927 with VBR.

 

VIOV vs VBR Performance

VIOV and VBR have performed similarly over the last 10 years, with VIOV only beating VBR by only 0.03% annually.

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

Here is a side by side comparison of their performance:

VIOV vs VBR Performance

Here is VIOV vs VBR performance on a chart:

VIOV vs VBR Performance Chart

As you can see, VIOV and VBR performance have overlapped over the last 10 years, with a difference of only 0.03% annually.

Similarities between VIOV and VBR:

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

 

VIOV and VBR Differences

The primary difference between VIOV and VBR is the index they track.  VIOV tracks the S&P Small-Cap 600 Value Index, while VBR tracks the CRSP US Small Cap Value Index.

Another difference between VIOV and VBR is the number of stocks in each, with VIOV having 463 different companies compared to 927 with VBR.

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

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

VIOV vs VBR Comparison Chart

Both are passively managed Vanguard ETFs with relatively low expense ratios (0.15% 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 VIOV and VBR:

  • Expense Ratio (0.15% vs 0.07%)
  • Number Of Holdings (463 vs 927)
  • Index The Fund Tracks
  • Level Of Diversification
  • Level Of Volatility

 

VIOV vs VBR Holdings

Vanguard’s VIOV has fewer holdings than VBR (463 vs 927).  They also have very different top 10 holdings with no overlapping companies in their top 10 holdings.

VIOV’s top 10 holdings make up 7% of its total holdings compared to 5% with VBR.

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

Here are VIOV and VBR’s top 10 holdings side by side:

VIOV vs VBR Holdings

VIOV and VBR are primarily made up of U.S Small-Cap Companies.

 

VIOV and VBR Holdings Overlap

There is an overlap between VIOV and VBR that includes 263 stocks.  Roughly 57% of VIOV’s holdings are included in VBR, and 29% of VBR’s holdings are in VIOV.

Here are VIOV and VBR holdings overlap:

VIOV vs VBR Holdings Overlap

There is an overlap by weight of about 14%:

Overlap By Weight

This gives VBR more diversification compared to VIOV.

 

VIOV Profile

  • Fund Inception: 2010
  • Expense Ratio: 0.15%
  • Number Of Stocks: 463
  • Top 10 Holdings: 7%

Vanguard S&P Small-Cap 600 Value ETF (VIOV) is focused on small-cap companies. As a result, the price-to-earning (P/E) ratio for VIOV is 13x, low compared to other ETFs.  This makes sense since the ETF is tracking value companies rather than growth.

The fund has $1.4 billion in total net assets.

 

VIOV Performance

Vanguard S&P Small-Cap 600 Value ETF (VIOV) has underperformed the S&P 500 and, therefore, Vanguard 500 Index Fund ETF (VOO) over the last 10 years:

VIOV Performance Chart

VIOV has averaged an 11% return over the previous 10 years which is excellent.

VIOV Performance

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

 

VIOV Holdings

Vanguard’s VIOV comprises Helmerich & Payne, South Jersey Industries, BankUnited, Insight Enterprises, and First Hawaiian and provides exposure to over 400 stocks.

VIOV Holdings

The top 10 holdings make up 7% of the portfolio.

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

 

VBR Profile

  • Fund Inception: 2004
  • Expense Ratio: 0.07%
  • Number Of Stocks: 927
  • Top 10 Holdings: 5%

Vanguard Small-Cap Value ETF (VBR) is focused on small-capitalization value stocks.  As a result, the price-to-earnings (P/E) ratio for VBR is 12 x which is low.

That is expected with a value index.  The fund has $50 billion in total net assets.

VBR was created in 2004 and currently has an expense ratio of 0.07%.  This is less expensive than VIOV, which has an expense ratio of 0.15%.

Here is what a 0.08% fee (difference between VIOV and VBR) will cost over 30 years.

Assuming you start with an initial investment of $100,000 and contribute $10,000 each year, over 30 years.  You will have roughly ~$60,000 less in your account.

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

 

VBR Performance

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

VBR Performance Chart

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

VBR Performance

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

 

VBR Holdings

Vanguard VBR’s top 10 holdings include Molina Healthcare, Quanta, Signature Bank, Marathon Oil, and Constellation Energy.  The ETF also provides exposure to over 900 stocks.

VBR Holdings

The top 10 holdings make up over 5% of the portfolio.  This gives VBR diversification within the small-cap sector but not broad diversification such as other ETFs like the Vanguard Total Stock Market Index Fund ETF (VTI).

 

No Minimum Investment

VIOV and VBR 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 VIOV or VBR due to their high prices per share.

There are two easy ways to invest in VIOV or VBR 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.

I like M1 Finance as the best option because it gives you the flexibility to purchase VIOV, VBR, and thousands of other stocks.

 

Which Is Better VIOV or VBR?

VIOV and VBR are similar investments.  However, VBR is better because it has a significantly lower expense ratio of 0.07%.  In addition, they both offer investors the ability to invest in the U.S Small Cap Value Market.

VBR offers similar returns with less volatility and lower cost than VIOV.

The expense ratio difference between these two ETFs makes a significant difference in 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, and they give you the ability to buy VBR, VIOV, and thousands of other stocks/ETFs.

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Is VIOV or VBR Better for Financial Independence?

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

I prefer VBR because I’m a big fan of keeping fees to a minimum.  It doesn’t get much better than VBR, with a tiny expense ratio of 0.07%.

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

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My Winner: VBR

My winner is VBR solely 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 VIOV and VBR can make for 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.

 


Disclaimer
This post may have affiliate links, which means I may receive commissions if you choose to purchase through links I provide (at no extra cost to you). Thank you for supporting the work I put into this site!

This information is my opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.
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