This Vanguard ETF Is a Top Choice

Key Morningstar Metrics for Vanguard Small-Cap Index ETF

• Morningstar Medalist Rating
  : Gold
• Process Pillar
  : Above Average
• People Pillar
  : Above Average
• Parent Pillar
  : High

Vanguard Small-Cap Index ETF VB

offers a well-diversified, low-turnover portfolio that is representative of the US small-cap market. These features, coupled with a best-in-class fee, make it one of the most compelling strategies in the small-blend Morningstar Category.

The fund tracks the CRSP US Small Cap Index, which sweeps in all small-cap US stocks that meet its market-cap criteria and are sufficiently easy to trade. These requirements help ensure the index represents its opportunity set and is easy to track. CRSP also takes measures during rebalances to make it more difficult for stocks to enter or exit the portfolio. This reduces turnover and the associated transaction costs, which can run high for difficult-to-trade small-cap stocks.

The fund weights its holdings by market cap, an efficient approach that harnesses the market’s consensus opinion of each stock’s relative value. Stocks that increase in size take up a larger share of the portfolio, while smaller companies that may be struggling take on a less important role. Its market-cap weighting also helps rein in turnover. Annual turnover tends to run less than 20% per year, less than half its average peer. The top 10 holdings account for just a few percentage points of the portfolio, minimizing stock-specific risk.

The fund’s sector allocations and style orientation usually mimic the category average, which helps translate the fund’s low fee into a distinct performance advantage. Only the fund’s financial-services sector allocation deviated from the category norm by more than 3 percentage points at the end of April 2026. Stocks from that sector receive about 4% less weight than the category average.

The small-cap market tends to be quite volatile, but that volatility can breed periods of exceptional performance, such as after market crashes. Small caps tend to fall faster than their larger peers but rebound faster. This fund’s low fee and turnover-conscious approach can help it capitalize on these periods of outperformance while controlling for unnecessary risk.

Vanguard Small-Cap Index ETF: Performance Highlights

That has translated into a strong long-term track record. The exchange-traded fund share class outperformed the category average by 1.7 percentage points, annualized from its 2004 inception through May 2026.

Its larger-than-average market cap limited drawdowns, helping the fund earn a sturdy risk-adjusted return advantage.

Turnover-friendly index rules helped the fund achieve its sizable advantage. For example, its market-cap weighting and leniency around the upper market-cap bound allow for fast-growing companies to remain in the portfolio long after they’ve crossed into mid-cap territory. The fund usually holds several stocks too large to be considered for most small-cap index funds. Their inclusion allows the fund to receive the full benefit of a small stock’s rise into mid-cap territory, and it has helped the fund realize 103% of the category norm’s upside since its inception.

The fund’s larger size also offered some reprieve during down markets. It has protected investors from downturns more effectively than the average of its peers. A larger allocation to mid-cap companies than some peers should marginally help contain volatility and drawdowns during periods of market stress. It has captured 97% of the category’s average downside since 2004.

Morningstar acquired the Center for Research in Security Prices, the provider of the index tracked by this fund, in February 2026. Morningstar analysts work independently from the index business, and the Morningstar Medalist Ratings for funds tracking CRSP indexes are based solely on the fund’s investment merits. Analysts do not provide qualitative ratings or opinions for investments managed by Morningstar or managed investments that track Morningstar indexes that incorporate discretionary inputs assigned by Morningstar employees on an ongoing basis, such as Morningstar Economic Moat Ratings or ESG Risk Ratings.