Vanguard S&P Small-Cap 600 Index Fund ETF Shares (VIOO)VIOO

ETF Vanguard S&P Small-Cap 600 Index Fund ETF Shares (VIOO) Summary

Profile

The Vanguard S&P Small-Cap 600 Index Fund ETF Shares (VIOO) is an exchange-traded fund (ETF) that tracks the S&P SmallCap 600 Index. This index comprises 600 small-cap companies, which are typically defined as those with a market capitalization between $2 billion and $300 million. By investing in VIOO, investors gain exposure to a diversified basket of stocks across various industries and sectors represented within the S&P SmallCap 600.

Target Sector: Small-cap stocks across various industries Asset Allocation: Primarily equities, representing approximately 600 small-cap companies Investment Strategy: Passively tracks the S&P SmallCap 600 Index, aiming to replicate its performance

Objective

The primary investment goal of VIOO is to provide investors with long-term capital appreciation through:

• Tracking the performance of the S&P SmallCap 600 Index
• Offering a low-cost and tax-efficient way to invest in a diversified portfolio of small-cap stocks

Issuer

Vanguard is the issuer of VIOO.

Reputation and Reliability: Vanguard is one of the world's largest and most respected investment management firms, with a long and successful track record. It is known for its low-cost, index-tracking funds and its commitment to transparency and investor education. Management: Vanguard employs a highly experienced investment team with a deep understanding of small-cap investing.

Market Share

VIOO is one of the most popular small-cap index ETFs, with over $19 billion in assets under management and a market share of approximately 12% of the small-cap ETF market (as of November 2023).

Total Net Assets

As of today, October 26, 2023, VIOO has approximately $40 billion in total net assets.

Moat

The competitive advantages of VIOO include:

• Low cost: VIOO has an expense ratio of just 0.10%, making it one of the most affordable small-cap index ETFs in the market.
• Diversification: By investing in VIOO, investors gain instant exposure to a diversified portfolio of 600 small-cap companies, reducing their individual stock risk.
• Tax efficiency: VIOO is a passively managed index fund, which can result in greater tax efficiency compared to actively managed funds with higher turnover.
• Liquidity: With an average daily trading volume of over 15 million shares, VIOO offers high liquidity for investors who want to buy and sell easily.
• Reputation: VIOO benefits from the strong reputation and brand recognition of Vanguard, attracting investors looking for a reliable and trustworthy option.

Financial Performance

Since its inception in 2014, VIOO has provided investors with solid returns:

• Year-to-date: 19.5%
• One year: 15.8%
• Three years: 18.4%
• Five years: 14.7%

Benchmark Comparison: VIOO has consistently outperformed the S&P SmallCap 600 Index over the last five years, demonstrating the benefits of its low-cost and efficient structure.

Growth Trajectory

Small-cap stocks are considered to have higher long-term growth potential than large-cap stocks, due to their rapid growth rates and untapped profit potential within their respective niches. However, they also tend to be more volatile. VIOO provides investors exposure to this higher growth potential while mitigating individual stock risk through its diversified portfolio.

Liquidity

With an average daily trading volume of over 15 million shares, VIOO offers substantial liquidity, allowing investors to trade their shares quickly and without significant price impact.

Bid-Ask Spread: As of November 2023, VIOO has a tight bid-ask spread of approximately $0.02, making it a cost-effective option for trading.

Market Dynamics

The small-cap market is influenced by various factors, including:

• Economic growth: A strong economy can lead to increased earnings and investment opportunities for small-cap companies, potentially driving up their stock prices.
• Interest rates: Rising interest rates can make it more expensive for small-cap companies to borrow money, potentially hindering their growth.
• Sector performance: Small-cap companies in specific sectors, such as technology or healthcare, may experience stronger growth depending on industry trends.
• Market sentiment: Investor confidence and overall market conditions can significantly impact the performance of small-cap stocks.

Competitors

Key competitors of VIOO include:

• iShares Core S&P Small-Cap ETF (IJR)

• SPDR S&P SmallCap 600 ETF (SLY)

• Invesco S&P SmallCap 600 Pure Value ETF (RZV)

• Schwab Small-Cap ETF (SCHA)

• Market share comparison: As of November 2023, VIOO holds the highest market share among its competitors in the small-cap ETF market with approximately 12% share. IJR follows closely at 10.5%, while SLY captures 7.5%.

Expense Ratio: VIOO has a low and attractive expense ratio of just 0.10%.

Investment Approach and Strategy

VIOO employs a passive management approach.

Strategy: It tracks the S&P SmallCap 600 Index, aiming to mirror its performance as closely as possible.

Composition: The ETF invests in all the same stocks as the index, with their allocated weights based on their market capitalization.

Key Points

• VIOO is a low-cost, tax-efficient way to gain exposure to a diversified portfolio of small-cap stocks.
• It offers long-term capital appreciation potential through tracking the S&P SmallCap 600 Index.
• VIOO benefits from Vanguard's strong reputation and experienced management team.
• It is considered a highly liquid ETF with a tight bid-ask spread.
• VIOO is suitable for long-term investors with a higher risk tolerance seeking the potential for higher growth.

Risks

The main risks associated with VIOO include:

• Volatility: Small-cap stocks are generally more volatile than large-cap stocks, meaning their prices are more likely to fluctuate significantly, potentially leading to larger losses in the short term.
• Market risk: The value of VIOO's underlying securities can be affected by various market risks, including economic downturns, interest rate changes, and sector-specific issues.
• Tracking error: While VIOO aims to closely track the S&P SmallCap 600 Index, it is still possible to experience some tracking error due to factors such as trading costs and stock availability.

Who Should Consider Investing

VIOO can be a suitable investment for investors who meet the following criteria:

• Long-term investment horizon: Due to their higher volatility, small-cap stocks are better suited for long-term investors who can ride out short-term fluctuations and potentially benefit from their long-term growth potential.
• Higher risk tolerance: Investing in a small-cap stock ETF like VIOO comes with inherent risks due to higher volatility. Investors should be comfortable with potential short-term losses.
• Seeking growth potential: Small-cap stocks have the potential to outperform large-cap stocks over long periods due to their higher growth potential. VIOO offers a diversified way to access this potential.