A Cheap, Silver-Rated Small-Cap Value Fund
Vanguard Small Cap Value ETF uses an approach that promotes low turnover and diversifies risk.
Alex Bryan: Vanguard Small Cap Value ETF is one of the cheapest small-cap value funds available, which supports its Morningstar Analyst Rating of Silver. It targets stocks representing the cheaper and slower growing half of the U.S. small-cap market and weights them by market capitalization.
This approach promotes low turnover, effectively diversifies risk, and accurately represents the opportunity set available to active managers. The resulting portfolio includes just over 800 holdings such as JetBlue, Rite Aid, and Barnes & Noble. Most of these firms do not enjoy sustainable competitive advantages. They also tend to have poor growth prospects and, in many cases, limited profitability, so they are not necessarily bargains. But they could become undervalued if investors extrapolate lackluster past growth too far into the future.
Alex Bryan does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.