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David Dierking, The Motley Fool
Thu, June 11, 2026 astatine 7:40 AM CDT 3 min read
Everyone connected Wall Street is watching Nvidia, Apple, and the artificial quality (AI) trade. It's understandable, fixed that the "Magnificent Seven" stocks person generated immense returns implicit the past 3 years.
The portion that fewer radical are paying attraction to close now, though, is the different extremity of the marketplace headdress spectrum. Small caps and the Vanguard Small-Cap ETF (NYSEMKT: VB) person go legitimately charismatic concern options close now. This money is up 25.5% implicit the past year, beating the 22.7% instrumentality of the Vanguard S&P 500 ETF over the aforesaid period, adjacent arsenic large-cap tech is roaring.
Missed Nvidia successful 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" awesome flashed for a little-known chipmaker called Nvidia. For the archetypal clip successful years, that aforesaid "Total Conviction" awesome is flashing for a institution 1/100th the size of Nvidia. Continue »
The improving net outlook for this segment, on with comparatively charismatic valuations, makes this a beardown bargain campaigner implicit the adjacent respective months.
How the Vanguard Small-Cap ETF is constructed
This money tracks the CRSP U.S. Small Cap Index, which covers astir the 85th to 98th percentile of U.S. marketplace cap.
That methodology accomplishes 2 things: It has a median marketplace headdress of implicit $10 billion, good supra the $4 cardinal median marketplace caps of the Vanguard Russell 2000 ETF and the Vanguard S&P Small Cap 600 ETF. That gives this money overmuch much of a large-cap tilt.
The S&P 600 scale besides uses a profitability surface for inclusion, whereas the Vanguard Small-Cap ETF methodology does not. If you consciousness tiny caps are going to rally, I personally would not privation the prime criteria successful place. Unprofitable companies are mostly much growth-oriented and person greater upside imaginable successful a bull-market rally.
VB: Performance and cardinal metrics
| Expense ratio | 0.03% |
| Assets nether management | $77.2 billion |
| One-year return | 26% |
| Three-year instrumentality (annualized) | 15.7% |
| Five-year instrumentality (annualized) | 6.4% |
| Number of holdings | 1,309 |
| Top sectors | Industrials (23%), tech (14%), financials (13%), user discretionary (13%) |
Data source: Vanguard.
Why tiny caps are a bargain present
The imaginable of tiny caps is keyed connected net and valuations. Small-company stocks are seeing net maturation rates accelerate. That inclination is apt to continue. In 2027, the radical is forecast to turn net by 18.3%, compared with a 17.3% maturation complaint for ample caps.
On apical of that, the Vanguard Small-Cap ETF trades astatine a price/earnings (P/E) aggregate of 21.6. That's a discount of much than 20% compared to the 27.4 aggregate for the Vanguard S&P 500 ETF.
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