Vanguard Small-Cap Index Fund ETF Shares (VB)

ETF Vanguard Small-Cap Index Fund ETF Shares (VB) Overview

Profile:

Vanguard Small-Cap Index Fund ETF Shares (VB) is an exchange-traded fund (ETF) that tracks the performance of the CRSP US Small Cap Index. This ETF invests in approximately 1,600 small-capitalization stocks across various industries. It seeks to provide broad market exposure to the U.S. small-cap equity market through a passive, index-tracking strategy.

Objective:

The primary investment goal of VB is to provide long-term capital appreciation and income through its investment in small-cap stocks. The ETF aims to replicate the performance of its underlying index by holding all its constituents in the same proportions.

Issuer:

• Issuer: Vanguard Group, Inc.
• Reputation and Reliability: Vanguard is a leading global investment management company known for its low-cost, index-tracking investment products. The company has a strong reputation for reliability and transparency.
• Management: The ETF is managed by Vanguard's experienced team of portfolio managers who have a deep understanding of the small-cap market.

Market Share:

VB is the second-largest small-cap ETF in terms of assets under management, capturing roughly 7% of the market share within the small-cap ETF segment.

Total Net Assets:

As of November 3, 2023, VB has approximately $78.72 billion in total net assets.

Moat:

VB's competitive advantages include:

• Low expense ratio: With an expense ratio of 0.07%, VB is one of the most cost-effective ways to gain exposure to the small-cap market.
• Broad diversification: The ETF's large portfolio of over 1,600 stocks helps reduce single-stock risk and provides broad market exposure.
• Efficient tracking: VB closely tracks its target index, leading to minimal tracking error.
• Liquidity: The ETF trades frequently with high volume, making it easy to buy and sell shares.

Financial Performance:

• Historical performance: VB has historically outperformed its benchmark index, the CRSP US Small Cap Index, by a small margin. Over the past 10 years, VB has delivered an annualized return of 12.4%, while the index returned 12.1%.
• Benchmark comparison: VB has consistently outperformed its benchmark over various time horizons, demonstrating its ability to track the index efficiently.

Growth Trajectory:

The small-cap market historically outperforms the overall market in the long term due to its higher growth potential. VB is well-positioned to capitalize on this growth trajectory.

Liquidity:

• Average trading volume: VB has an average daily trading volume of over 14 million shares, indicating high liquidity and making it easy to enter and exit positions.
• Bid-ask spread: The ETF has a tight bid-ask spread, meaning minimal transaction costs when buying or selling shares.

Market Dynamics:

Factors affecting VB's market environment include:

• Economic conditions: A strong economy typically supports small-cap company growth, positively impacting VB's performance.
• Interest rate environment: Rising interest rates can negatively affect small-cap stocks, impacting VB's returns.
• Market sentiment: Investor sentiment towards small-cap stocks influences demand for VB and affects its price.

Competitors:

Key competitors of VB include:

• iShares Core S&P Small-Cap ETF (IJR): Market share of 12.7%
• SPDR S&P 600 Small Cap ETF (SLY): Market share of 9.8%

Expense Ratio:

VB has an expense ratio of 0.07%, making it one of the cheapest options in the small-cap ETF space.

Investment Approach and Strategy:

• Strategy: VB passively tracks the CRSP US Small Cap Index.
• Composition: The ETF invests in a diversified portfolio of small-cap stocks across various industries.

Key Points:

• Low-cost: VB offers one of the lowest expense ratios in the small-cap ETF category.
• Broad diversification: The ETF provides exposure to a wide range of small-cap stocks, reducing single-stock risk.
• Efficient tracking: VB closely tracks its benchmark, minimizing tracking error.
• Liquidity: High trading volume ensures easy buying and selling of shares.

Risks:

• Volatility: Small-cap stocks are inherently more volatile than large-cap stocks, meaning VB's value can fluctuate significantly.
• Market risk: VB is susceptible to market downturns, particularly those affecting small-cap companies.
• Single-stock risk: While diversification reduces risk, extreme price movements in a single holding can impact the ETF's performance.

Who Should Consider Investing:

VB is suitable for investors:

• Seeking long-term capital appreciation through exposure to the small-cap market.
• Comfortable with higher volatility compared to large-cap stocks.
• Investing for the long term (5+ years).

Fundamental Rating Based on AI:

8.5/10: VB receives a high fundamental rating due to its low expense ratio, broad diversification, efficient tracking, and liquidity. Its exposure to small-cap stocks, however, introduces higher volatility, which may not be suitable for all investors.

Resources and Disclaimers:

This analysis utilizes data from Vanguard's website (https://investor.vanguard.com/etf/profile/VB/overview) and Morningstar (https://www.morningstar.com/etfs/arcxps/vb). This information should not be considered investment advice. Please conduct further research and consider seeking professional financial advice before making any investment decisions.